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IT Giants TCS, Infosys Expect Digital Services Growth to Soar

India’s software services sector has won more business during the Covid-19 pandemic as companies globally look to boost their digital presence and demand IT services


Infosys
Bengaluru-headquartered Infosys and Mumbai-based TCS came to prominence by giving Western clients low-cost solutions to problems such as the Y2K bug and have become global giants in international business as outsourcing grew. Photo: Reuters

 

Infosys raised its revenue forecast and Tata Consultancy Services (TCS) predicted robust demand on Wednesday as the Indian IT giants said they expect tech spending to continue, particularly for digital services such as the cloud.

Often seen as a bellwether for India’s more than $190 billion software services industry, Infosys said large deal wins worth $2.53 billion in the three months to the end of December had boosted its confidence.

Mumbai-based TCS and Bangalore-headquartered Infosys came to prominence by giving Western clients low-cost solutions to problems such as the Y2K bug and have become global giants in international business as outsourcing grew.

Infosys expects 19.5-20% revenue growth for the financial year to end-March 2022, compared with a previous 16.5-17.5% prediction, while retaining its operating margin guidance.

“We had a strong set of large deals and the pricing environment remains stable … the amount clients want to spend on technology is going up,” chief executive Salil Parekh told a virtual news briefing.

 

Boost Digital Presence

India’s software services sector has won more business during the Covid-19 pandemic as companies globally look to boost their digital presence and demand IT services ranging from cloud-computing, digital payment infrastructure to cybersecurity.

Infosys, India’s No.2 IT company, reported a near 12% rise in its consolidated net profit to 58.09 billion rupees ($786 million) in the third quarter, beating analysts’ average estimate of 57.05 billion rupees, according to Refinitiv Eikon.

Announcing its earnings for the December quarter, the larger TCS said its consolidated net profit rose 12.3% to 97.69 billion rupees, slightly below an average analyst forecast of 98.44 billion rupees, Refinitiv data showed.

“It’s a very broad-based growth that we are experiencing and very broad-based demand environment and we are participating strongly across the full spectrum of demand,” TCS chief executive Rajesh Gopinathan told reporters. “That gives us quite a lot of confidence in terms of outlook for the future…”

 

Long-Term Growth

The quarter saw clients invest in technology for long-term growth, TCS said, adding that its growth was across all services including cloud, cyber security, consulting and services integration, “internet of things” and digital engineering.

Consolidated revenue from operations at TCS jumped 16.4% to 488.85 billion rupees, while Infosys posted revenue of 318.67 billion rupees.

“The large deal wins and the [Infosys] CEO’s statement on large digital transformation pipeline gives … confidence that the  companies are on a strong footing,” Saurabh Jain, assistant vice president at SMC Securities, said.

Another Indian IT major Wipro, which reported earnings earlier in the day, said its December quarter revenue climbed 30%, while net profit remained nearly flat.

 

  • Reuters with additional editing by Kevin Hamlin

 

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Kevin Hamlin

Kevin Hamlin is a financial journalist with more than 40 years of experience covering Asia. Before joining Asia Financial, Kevin worked for Bloomberg News, spending 12 years as Senior China Economy Reporter in Beijing. Prior to that, he was Asia Bureau Chief of Institutional Investor for ten years.

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