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UBS Investment Research
Indian IT Services
Highlights of the UBS India CEO/CFO forum
UBS India conference, 1-3 November 2010
We played host to Tata Consultancy Services (TCS), Wipro, Tech Mahindra, and
Mahindra Satyam at the UBS India CEO/CFO Forum held on 1-3 November 2010.
These companies were well represented by senior management personnel who
provided key insights into the demand and supply environment for the sector.
Companies are more bullish on demand, investor concerns shift to supply
Most companies that attended our conference showed increased confidence in the
demand outlook, bolstered by the strong demand uptick seen over the past few
quarters. The industry is now witnessing broad-based demand growth across
multiple geographies and industry verticals. Most investor concerns, therefore,
centred on supply pressures and margin maintenance over the coming quarters.
We believe that demand is likely to remain robust with the caveat that a macro
economic crisis could once again impact revenue growth for the sector. In the
current scenario, we expect the labour market to remain tight in the three-eight
years’ experience range for the next few quarters. We believe that this, along with
an appreciating currency, could exert pressure on margins.
Remain cautious, TCS remains top pick in the sector
We remain cautious in our outlook, as we believe that margin pressures are yet to
ease and will cause EPS growth to lag behind revenue growth for the sector. TCS
remains our preferred pick in the sector given stronger-than-expected revenue
momentum and margin resilience.
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