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Union Budget 2011-12 is likely to be a non-event for the Indian IT sector as the wish list is predominately skewed
with mid to small-size IT companies vying for the extension of STPI (10A/10B) scheme. In the last budget, the
government did not pay heed to the same outcry by these companies and left the expiry of the scheme for March
2011. Currently, most tier-I companies have their 10-year window utilised for majority of their STP and they are
growing at a rapid pace, so they are not too sensitive about the extension. However, it is of utmost importance to
mid to small-size companies as they are struggling with headwinds such as wage inflation in a big way on top of
d t th hi moderate growth pace, which in addition to a steep upswing in tax rates from current 17-19% to 22-24% from
beginning of FY2012 will restrict their earnings growth.
Also, the Indian government has started focusing on e-governance lately, with its various initiatives such as RAPDRP,
UIDAI and Sarva Shiksha Abhiyan; this is also a space to look out for if the government decides on increasing the
outlay related to these schemes to move towards modernisation. Some of the Indian tier-I companies have bagged
some crucial deals under these schemes and have started setting up SBUs to tap the domestic market. Also,
increased emphasis on PPP in education and incremental allocation for ICT implementation in schools would
benefit companies catering to the K-12 segment, including Educomp Solutions, NIIT and Everonn Education.
Though the wish list remains same as that in the last budget, we do not expect any positive fireworks such as
extension of STP expiry. However, if the wish list is met this time around, we expect mid-size companies, including
Tech Mahindra, KPIT Cummins and Mphasis, to be the major beneficiaries and tier-I IT companies, including TCS,
HCL Tech and Wipro, to benefit to some extent.
Top Picks
TCS
Infosys
HCL Tech
Mphasis
NIIT
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Software
Union Budget 2011-12 is likely to be a non-event for the Indian IT sector as the wish list is predominately skewed
with mid to small-size IT companies vying for the extension of STPI (10A/10B) scheme. In the last budget, the
government did not pay heed to the same outcry by these companies and left the expiry of the scheme for March
2011. Currently, most tier-I companies have their 10-year window utilised for majority of their STP and they are
growing at a rapid pace, so they are not too sensitive about the extension. However, it is of utmost importance to
mid to small-size companies as they are struggling with headwinds such as wage inflation in a big way on top of
d t th hi moderate growth pace, which in addition to a steep upswing in tax rates from current 17-19% to 22-24% from
beginning of FY2012 will restrict their earnings growth.
Also, the Indian government has started focusing on e-governance lately, with its various initiatives such as RAPDRP,
UIDAI and Sarva Shiksha Abhiyan; this is also a space to look out for if the government decides on increasing the
outlay related to these schemes to move towards modernisation. Some of the Indian tier-I companies have bagged
some crucial deals under these schemes and have started setting up SBUs to tap the domestic market. Also,
increased emphasis on PPP in education and incremental allocation for ICT implementation in schools would
benefit companies catering to the K-12 segment, including Educomp Solutions, NIIT and Everonn Education.
Though the wish list remains same as that in the last budget, we do not expect any positive fireworks such as
extension of STP expiry. However, if the wish list is met this time around, we expect mid-size companies, including
Tech Mahindra, KPIT Cummins and Mphasis, to be the major beneficiaries and tier-I IT companies, including TCS,
HCL Tech and Wipro, to benefit to some extent.
Top Picks
TCS
Infosys
HCL Tech
Mphasis
NIIT
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