While industry body Nasscom will be releasing the final numbers for FY15 for the sector and its prediction for FY16 on Tuesday, research firm Offshore Insights says FY16 will be a moderate year for IT services
India's IT services sector may not be in for a gala party in FY16 if research firm Offshore Insights is to be believed. A report by the firm says that the sector is likely to see only 10-12 percent growth in FY16 - that's not much higher than the 11.5-12 percent growth expected in FY15.
The IT sector may be forced to take a reality check as it steps into FY16. While industry body Nasscom will be releasing the final numbers for FY15 for the sector and its prediction for FY16 on Tuesday, research firm Offshore Insights says FY16 will be a moderate year for IT services, with growth coming in at a flat 12 percent because of consolidation across European markets and discretionary budgets shrinking globally.
Sudin Apte, CEO and research director, Offshore Insights Research & Solutions, says: "Majority of clients are still under severe cost pressures. Clients' mood continues to look somewhat conservative, while their businesses are somewhat recovering, technology spend is not really growing substantially and growth looks moderate. So our interactions with nearly 400 North American, European companies show that they possibly will have a very similar increase in the budget than they had in the current financial year."
But here's the surprise. Offshore Insights believes that the energy and utilities sector, which has been a cause for concern for the top 6 IT players, will witness the highest growth in IT spends, at 7.7 percent. Ofcourse, that's because of a low base and some new projects taking off.
That being said, all other growth forecasts are pretty much as they were last year. Growth in the BFSI segment is expected at a moderate 4.5-5 percent, while manufacturing is seen growing at 5 percent
Apte adds: "Financial services and insurance, manufacturing and telecom are the three verticals that give the largest chunk of business for Indian IT companies. We possibly will see some of the deals trickling in for energy and utilities especially energy companies but again as the base is small, the larger percentage may not have much larger impact on the revenues of the companies."
As things stand, Offshore Insights says TCS and Cognizant are best poised to get the lion's share of this growth wave, while Infosys may struggle to catch the wind in its sails. However, the research report says that IT deals will shift from core IT services to newer service platforms and softwares in the second half of the fiscal and that will separate the men from the boys.
TCS stock price
On February 09, 2015, Tata Consultancy Services closed at Rs 2515.15, down Rs 60.85, or 2.36 percent. The 52-week high of the share was Rs 2834.00 and the 52-week low was Rs 2000.50.
The company's trailing 12-month (TTM) EPS was at Rs 104.29 per share as per the quarter ended December 2014. The stock's price-to-earnings (P/E) ratio was 24.12. The latest book value of the company is Rs 224.90 per share. At current value, the price-to-book value of the company is 11.18.
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