PUNE/MUMBAI: Building upon deal wins announced in recent months, midsize IT services providers are expected to show higher growth rates in the second half of the ongoing fiscal year.
Early concerns around the impact of the Covid-19 pandemic on their performance have been put to rest, analysts said, with several companies reporting higher-than-average new deal wins in the last few months.
L&T Infotech (LTI), Persistent Systems and Coforge have reported better-than-expected numbers, while Hexaware has reported more new business in the previous quarter compared to all of financial year 2019. Hexaware follows a January-December fiscal year.
“The strategy to go for multi-year, multi-million dollar deals is paying off,” said Sandeep Kalra, CEO, Persistent Systems. The Pune-based company was among the few to report a year-on-year increase in profits and revenues, crossing Rs 1,000 crore in quarterly revenue for the first time in the quarter ended September 30.
Mindtree, too, has seen broad-based growth, with the travel business - which had taken a hit in the previous quarter -- starting to grow. “It will be a while before things normalise, but we are starting to see green shoots of recovery in this business,” said CEO Debashis Chatterjee.
Analysts said that cost-cutting initiatives, combined with a drop in operational and travel expenses as people worked from home, have resulted in improvement in profit margins at these firms.
“We continue to do our business in four ways -- we look at growth accounts, we invest in what we call invest accounts tremendously in driving growth for the company; we continue to work on new accounts to open new channels of future growth, and we continue to chase new deals,” said Sanjay Jalona, CEO of LTI.
Almost all mid-tier firms are ramping up their hiring plans on newer deal wins. LTI added up to 1,000 freshers in the previous quarter and is expected to hire more in the coming quarters. Persistent has said it would add up to 800 people over the next six months.
As customers are focused on cost optimisation as well as gearing up for the long term, technology spending across most verticals have been on the up.
KPIT Technologies, which primarily works with automobile manufacturers, has been signing more longer-term projects -- of 3-5 years -- as clients cautiously start investing in areas like electric and self-driving cars, said chief executive Kishor Patil.
Coforge said it expects organic revenue growth of at least 6% year on year for the current financial year, on the back of healthy deal wins and a robust pipeline.
“The portfolio focus that these companies have is paying off, with a growth in the top 5 and top 10 clients’ business. The deal wins and pipeline is robust for most of the companies and we expect them to maintain this growth momentum,” said Aniket Pande, research analyst at Prabhudas Lilladher.
Given their current cash reserves, analysts also expect an uptick in mergers and acquisitions in the coming quarters.
“We expect more action on M&A as companies try to strengthen their presence in other geographies,” said Harit Shah, senior research analyst, KRChoksey Shares & Securities.
Early concerns around the impact of the Covid-19 pandemic on their performance have been put to rest, analysts said, with several companies reporting higher-than-average new deal wins in the last few months.
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“The strategy to go for multi-year, multi-million dollar deals is paying off,” said Sandeep Kalra, CEO, Persistent Systems. The Pune-based company was among the few to report a year-on-year increase in profits and revenues, crossing Rs 1,000 crore in quarterly revenue for the first time in the quarter ended September 30.
Mindtree, too, has seen broad-based growth, with the travel business - which had taken a hit in the previous quarter -- starting to grow. “It will be a while before things normalise, but we are starting to see green shoots of recovery in this business,” said CEO Debashis Chatterjee.
Analysts said that cost-cutting initiatives, combined with a drop in operational and travel expenses as people worked from home, have resulted in improvement in profit margins at these firms.
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“We continue to do our business in four ways -- we look at growth accounts, we invest in what we call invest accounts tremendously in driving growth for the company; we continue to work on new accounts to open new channels of future growth, and we continue to chase new deals,” said Sanjay Jalona, CEO of LTI.
Almost all mid-tier firms are ramping up their hiring plans on newer deal wins. LTI added up to 1,000 freshers in the previous quarter and is expected to hire more in the coming quarters. Persistent has said it would add up to 800 people over the next six months.
As customers are focused on cost optimisation as well as gearing up for the long term, technology spending across most verticals have been on the up.
KPIT Technologies, which primarily works with automobile manufacturers, has been signing more longer-term projects -- of 3-5 years -- as clients cautiously start investing in areas like electric and self-driving cars, said chief executive Kishor Patil.
Coforge said it expects organic revenue growth of at least 6% year on year for the current financial year, on the back of healthy deal wins and a robust pipeline.
“The portfolio focus that these companies have is paying off, with a growth in the top 5 and top 10 clients’ business. The deal wins and pipeline is robust for most of the companies and we expect them to maintain this growth momentum,” said Aniket Pande, research analyst at Prabhudas Lilladher.
Given their current cash reserves, analysts also expect an uptick in mergers and acquisitions in the coming quarters.
“We expect more action on M&A as companies try to strengthen their presence in other geographies,” said Harit Shah, senior research analyst, KRChoksey Shares & Securities.
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