Software services giant Accenture's increase in its revenue growth forecast for this new financial year starting April has raised the prospects for the Indian information technology (IT) industry, which is limping back from a prolonged period of slow growth, amid a pivot to emerging technologies such as cloud and artificial intelligence.
Accenture has revised its revenue growth projection to 6.5-8.5% in dollar terms for this financial year from 6-8% it had predicted earlier. The revision comes on the back of strong foreseeable demand for digital and cloud technology.
"We expect Infosys, HCL Technologies and Tech Mahindra to grow faster in 2019-20 than the previous financial year (2018-19). Growth will be led by a ramp-up of large deals won by companies over the past two quarters. All companies reported a strong deal flow for the December 2018 quarter," said Kawaljeet Saluja, head of research at Kotak, in a note to investors and media ahead of the announcement of fourth-quarter and full-year results of major IT firms next week. IT companies usually declare results ahead of other industries, starting from the second week of April.
Kotak said that IT firms with a high exposure to banking, retail and manufacturing will get affected, without quantifying the impact. Despite rupee depreciation, all IT companies are going to see a decline in their margins due to onsite hiring, it added.
In March, TechCircle reported that while National Association of Software and Services Companies (NASSCOM) refused to make any revenue growth projection for a financial year for the IT sector for the first time ever, ICRA (formerly Investment Information Credit Rating Agency Ltd) had predicted 7-9% growth for the industry in dollar terms, driven by digital spending by large enterprises.
ICRA had said that small-scale prototype digital projects had started evolving into enterprise-level larger implementations coupled with improvement in discretionary spend by clients of IT firms. This, it said, supports future growth for the IT companies in 2019-20.