Infosys, India’s second-largest software services exporter, is not seeing any slowdown in the banking vertical, its chief operating officer UB Pravin Rao said. Mid-sized firms like Virtusa and Persistent Systems too said they have not seen any slowdown in demand environment.
The concerns about the demand environment was triggered after US-based Cognizant this week forecast its 2016 revenue to rise 10-14 per cent, compared to consensus estimates of 14 per cent, driven by unpredictable spending in healthcare and financial-services verticals.
The warning had spooked investors, who sent the shares of Indian information technology firms tumbling.
“Cognizant indicated that a push-out in discretionary projects within the banking and financial services vertical is one of the key reasons for its muted guidance for first quarter. This will likely remain an overhang for Indian vendors given the 26-40 per cent revenue exposure to this vertical,” foreign brokerage Jefferies said in a recent note to clients.
Infosys joins its bigger peer Tata Consultancy Services in giving a positive note to the demand from the banking vertical.
About the weaker guidance from its US rival Cognizant, Mr Rao said, “It may be client-specific for them. For us it is not a concern and the banking vertical is doing well.” He was speaking to the media persons on the sidelines of the Nasscom India Leadership Forum on Thursday.
On Wednesday, N Chandrasekaran, CEO and MD of Tata Consultancy Services, had said that the firm’s banking vertical is doing well, adding there are no concerns and its insurance vertical too has started doing well.
Nasscom has predicted that the industry will grow in the range of 10-12 per cent for the fiscal, 2017, which is slower than the 12.3 per cent growth in the 2016 financial year.
Jefferies said Cognizant’s commentary is consistent with the sector risks such as growth slowdown on the back of a weak macro environment, margin pressure due to a weak pricing environment and high competitive intensity and uncertainty in spending given the technology transitions towards digital.
“In this backdrop, we continue to prefer Infosys for its steadily improving revenue trajectory and TCS for its stability (both rated ‘buys’). Wipro, HCL Tech and Tech M, each with its own challenges, are rated ‘hold’,” it added.
US IT firm Virtusa, which is in the process of closing its acquisition of Polaris Consulting and Services Ltd to strengthen its banking vertical, said it has not seen any slowdown. It expects the deal to close in the March quarter.
“We are on the consumer and payment side of the banking business. We have not seen any slowdown. We are seeing increasing activity as banks want to compete more fiercely in serving customers. On the payments side, transformation is happening and clients are seeking more solutions,” Samir Dhir, executive vice president, chief delivery officer and head-India operations, Virtusa, told The Hindu.
“Because of tech spending shifting to the digital side the legacy spending is going to come down. That is a given. Everybody now acknowledges that. Overall for the industry it is going to be a challenge. For a company like us, we are already focusing on digital aspects, so it is not a headwind,” Mritunjay Singh, executive director and chief operations officer of Persistent Systems, said in an interview.
“More the stress in the system more quickly people will shift to newer technology.”
Infosys joins TCS in giving a positive note to demand from the banking vertical
