Major Indian IT companies are optimistic about revenue growth for FY25, supported by increased hiring. Despite positive indicators, the upcoming quarter may face challenges due to seasonality and rising wage pressures. Firms like Infosys and HCLTech have revised revenue forecasts upward, while TCS highlights a focus on operational efficiency and investment amidst shifting economic landscapes.
India’s premier IT services companies are displaying increasing optimism regarding revenue growth for the current fiscal year (FY25), leading to heightened hiring practices. Despite these positive projections, the upcoming third quarter poses potential setbacks, primarily due to seasonal slowdowns and climbing wage expenses that are likely to affect overall profit margins. The optimistic revenue projections coincide with a reduction in order volumes in the first half of FY25 compared to the same period last year. Notably, the industry has seen improved hiring numbers, with major firms like Tata Consultancy Services (TCS), Infosys, and Tech Mahindra increasing their workforce. In H1FY25, these companies reported better hiring metrics compared to the corresponding previous year. Infosys revised its growth forecast from an initial 1-3% to a more robust 3.75-4.5% for the fiscal year, following a strong performance in the first half where revenue grew close to 3% year-over-year. CEO Salil Parekh attributed this increase to several factors, including robust growth in smaller deals and an overall improving demand situation, particularly in financial services. HCLTech also adjusted its revenue growth outlook slightly upward to 3.5-5%, marking a notable increase from earlier estimates. While confidence in market conditions has grown, CEO C. Vijayakumar expressed awareness of external economic variables and geopolitical issues that could affect growth trajectories across various business sectors. TCS, India’s largest IT services company, remains cautious in providing specific guidance yet expressed optimism regarding the easing of interest rates potentially leading to improved investment opportunities. CEO K. Krithivasan emphasized that operational efficiency has become a focal point for clients amidst the evolving economic landscape. Rising employee counts in the industry reflect increasing demand for IT services, with TCS, Tech Mahindra, and Wipro all reporting workforce expansions since the start of FY25. TCS notably added over 11,000 employees, reversing the headcount decrease reported in the previous year, indicating positive demand trends. Conversely, HCLTech’s workforce shrank due to strategic restructuring from a joint venture exit, with significant job cuts reported. This dual scenario of hiring and layoffs illustrates the varied approaches taken by different firms in adapting to market demands while positioning themselves for future growth. Looking ahead, the third quarter is anticipated to present challenges, as it typically encounters a seasonal decline in productivity due to holiday-related disruptions. Wipro’s CEO Srinivas Pallia acknowledged these potential hurdles, suggesting that the impact could vary significantly depending on client sectors experiencing furloughs. Moreover, impending wage hikes are projected to impede margin improvements further for Indian IT services firms. HCLTech’s CFO, Shiv Walia, indicated that wage increment impacts would result in measurable basis point losses in profitability for the subsequent quarters, showcasing the financial pressures faced by the industry. Despite these challenges, analysts suggest that growth opportunities remain on the horizon, particularly due to the acceleration of artificial intelligence (AI) adoption and technology modernization initiatives. Phil Fersht noted a rebound in growth for Indian IT services firms adapting to evolving market expectations around AI and digital infrastructure. However, there are conflicting views regarding the pace of recovery. Peter Bendor-Samuel highlighted a trend towards insourcing affecting traditional outsourcing models, suggesting a tempered outlook despite the enhanced hiring scenarios witnessed within the sector. This complex interplay between growth strategies and market demands presents a nuanced picture of the future for Indian IT companies.
The Indian IT sector is one of the largest markets globally, valued at approximately $254 billion. The industry has faced numerous challenges in recent years, including demand slowdowns and macroeconomic pressures, which have impacted revenue growth and profitability. Major firms have responded by adjusting their forecasts and increasing hiring to position themselves for anticipated recovery amidst broader technological shifts towards AI and data modernization.
The Indian IT industry’s forecast for FY25 shows cautious optimism driven by increased hiring and upgraded revenue projections. Despite potential hurdles in the upcoming third quarter due to seasonal factors and rising wage costs, the sector remains resilient. Future growth trends appear influenced by advancements in artificial intelligence and technology modernization, although the effects of insourcing may temper recovery. Overall, the landscape presents a blend of opportunities and challenges for industry stakeholders.
Original Source: www.livemint.com
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