IT weekly wrap: Earnings hint at revival in banking, retail biz; Digital in focus

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With HCL Technologies reporting the fourth quarter numbers this Wednesday, the Indian IT industry’s top four have made it clear that digital is the way to go, even though each of them is taking a different path to get there.

Also read: The year ahead for IT: Digital could separate the sheep from goats

HCL, the fourth largest Indian technology services firm, has not yet overtaken its closest competitor Wipro, as was widely expected, but the firm has made some bold bets on digital that are markedly different from its larger rivals.

Tata Consultancy Services is clearly the market favourite as it continues to execute its strategy of going after an increasingly digital business. Infosys has more or less made it clear that it is moving to its core business of consulting and services, instead of the more products focused plans that the previous chief Vishal Sikka had.

While Wipro posted the most disappointing numbers this fourth quarter, much of its woes come from client-specific issues, including two of them going bankrupt. Analysts have also pointed out that the company is making heavy investments in digital and local hiring, which is impacting margins.

HCL, on the other hand, is looking at intellectual property focused partnerships among other things to lead its growth story. It’s a risky bet, but one that is worth watching out for.

Most of these companies are also cannibalising some of their own revenues to channel more business towards their digital offerings.

Growth for the larger firms has continued to remain slow, and the midcaps have continued to outperform, in line with what analysts have said at the beginning of this earnings season.

Also Read: NIIT Technologies Q4 profit jumps 17% to Rs 97.3 cr; Q4 order inflow at $145 mn

What is now clear is that the softness in banking and retail sectors that was plaguing the industry for the past couple of years is now looking up.

Tech Mahindra, the fifth largest IT firm is yet to declare results, but its results are expected to be along similar lines as its larger rivals. It will report results on May 25, the same day the General Data Protection Rules in Europe kick in. This new data protection regime is likely to have an impact on companies across sectors.

What is clear for now is that execution will differ for each IT services player, but a digital future is what they are all looking at to drive growth and possibly innovation in their decades-long business models