Brexit, tight-fisted banks might upset Nasscom's growth projection

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With Infosys and Cognizant cutting their revenue growth guidance for the financial year, Brexit and pressure in financial services may affect the earnings projection for the information technology services industry by Nasscom.

This could well be the first time the industry clocks growth in the single digits.

“In our conversations with companies, we have not come across anything to revise our guidance. We will undertake a revision only when we think the industry is unlikely to meet the lower end of our guidance,” said Sangeeta Gupta, vice-president, Nasscom.

Gupta added Nasscom could review growth rates after the second-quarter results.

CONVERSION PANGS
  • Nasscom reckons the industry will grow at 10-12% for 2016-17

     
  • Infosys lowered its full-year dollar revenue growth guidance to 10.5-12% from an earlier 11.5-13.5%

     
  • Cognizant, too, lowered its guidance for full year in two subsequent quarters from 10-14% to 8.45-9.5%

For 2016-17, Nasscom reckons the industry will grow at 10-12 per cent.

“Tight-fisted financial services, lower discretionary spending and a slow start to the year will constrain industry growth to single digits in 2016-17. The market share gain story for Indian infotech is intact, but the sector is unlikely to see the kind of spending it needs to post robust growth,” said K Saluja and J Doshi of Kotak Institutional Equities in a report.

India’s second largest infotech services provider Infosys lowered its full-year dollar revenue growth guidance to 10.5-12 per cent from an earlier 11.5-13.5 per cent. Nasdaq-listed Cognizant, too, lowered its guidance for the full year in two subsequent quarters from 10-14 per cent to 8.45-9.5 per cent.

Analysts said the uncertainty was due to Brexit and the industry might reach the lower end of Nasscom’s projection for the year.

“Even if a revision happens, it will not impact the fundamentals of the industry,” said Sarabjit Kour Nangra of Angel Broking.

The first quarter, traditionally a strong one, saw all the major players faltering.

TCS reported a sequential constant currency growth rate of 3.1 per cent, Infosys 1.7 per cent, Wipro two per cent and HCL Technologies 3.3 per cent.

“At this point it is difficult to predict which way the industry will go. The first quarter is just over, but one big acquisition will move the needle in the positive direction,” said an industry executive on condition of anonymity.


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