As Indian IT heavyweights like TCS, Infosys, Wipro, and others brace against inflation due to their global exposure, experts believe that the momentum in the Indian IT industry would slow down further in the times to come and a cautious approach was advisable.
Harsha Upadhyaya, President and CIO of Equity at Kotak Mahindra AMC, highlighted that the margin pressures have become evident in Indian IT sector companies. He also stressed that hiring in the industry has witnessed a slump, indicating a slowdown in business momentum.
“We are already seeing some pressures on the margin across companies. The hiring numbers across the industry have been quite mute in the recent times. All these things point to the fact that business momentum in the IT sector is somewhat stalling,” Upadhyaya told Business Today.
It is worth noting that Indian tech giants like TCS, Infosys, and Wipro have already started feeling the pinch of margin pressures. As per the earnings report of the first quarter of the financial year 2022-23, these companies reported lower than expected profits and this has seeped into the variable payouts to employees as well.
While TCS, the biggest Indian software company, postponed the variable compensation to its employees, Infosys slashed it to 70 per cent and Wipro altogether deferred it. Variable payout, better known as performance pay, depends on the overall performance of the employee and the company.
Moreover, as per the latest report by Naukri.com, the IT sector recorded a de-growth of 10 per cent in hiring activity in the month of August.
Upadhyaya noted that although the top brass of these companies still predicts positive forecasts, he believes otherwise. He said, “While the management commentary is still quite positive, we believe that things are not likely to be the same as you go forward. There is every likelihood of 2023 IT budgets to get delayed or even curtailed to some extent.”
It is interesting to note that the IT sector indices have felt the pressure of the ongoing economic slowdown. The BSE IT index has fallen over 21 per cent since the beginning of this year and has witnessed a downtrend of over 15 per cent since the past year. Similarly, the Nifty IT index has slipped over 25 per cent year to date and has lost over 17 per cent in the last year. TCS slipped over 18 per cent, Infosys fell over 12 per cent, while Wipro crashed over 37 per cent year to date.