IT majors upbeat on topline growth in FY23
IT major Infosys on 15% guidance, while India’s largest IT exporter TCS says it’s on strong growth trajectory
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Bengaluru: Despite multiple headwinds in the macroeconomic front, both Tata Consultancy Services (TCS) and Infosys are confident of maintaining their strong revenue growth momentum in the current financial year.
While Infosys has already guided for 13-15 per cent growth in its revenues in FY23, the management of TCS has indicated that the company is on a strong wicket to maintain its performance in this fiscal year.
According to analysts, though the commentary has exuded confidence, there are multiple headwinds that Indian IT industry has to face during fiscal 2023.
"Rising inflation compounded with talent shortage has led to CIOs (chief information officers) rethinking their IT budgets which has slowed down the decision-making process, especially in Europe where IT spending has currently paused. Higher inflation will lead to postponement of discretionary spends, and focus on cost optimisation will increase. Higher focus on cost may lead to dampening of tech budgets and reduction in discretionary spending," ICICI Securities said in a note.
Global consultancy firm Gartner has already predicted that global IT spending to grow at four per cent in 2022 as compared to 5.1 per cent seen in the last quarter of 2021. Europe plays a critical role in sustaining the growth momentum for Indian IT services players which have seen increased outsourcing from European enterprises.
However, the Russia-Ukraine war has added to the macroeconomic uncertainty in the continent.
Experts believe that this is going to delay decision making apart from holding back discretionary spending on new age technologies.
Against this backdrop, Indian IT majors like TCS and Infosys are in a good stead because of strong deal pipeline. "We have, for the year, $9.5 billion in large deals, 40 per cent net new for the quarter, $2.3 billion or 48 per cent net new and a strong basis of expansion in dimensions relating to new client work and related to actual expansion across different strata plans within client expansion. Given all of those factors, we came to a view that we could see growth in the range of 13 to 15 per cent for this financial year," said Salil Parekh, CEO of Infosys in the analyst call.
Similarly, TCS also had a strong deal pipeline, reported for both fourth quarter and FY22. "In Q4, we had very strong tailwinds, resulting in an all-time high order book with TCV (total contract value) of $11.3 billion. This includes two mega deals of roughly $1 billion each, even excluding these two mega deals, our order book TCV in Q4 is at $9.5 billion, which is also an all-time high," said Rajesh Gopinathan, CEO and MD of TCS at the analyst call.
Though the deal pipeline remained strong with strong support from domestic IT firms have to manage supply side issues by containing attrition.
