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“Budgets frozen, waiting for spending”
We recently met the management of Infosys, Wipro, MindTree
and Sasken at their corporate offices in Bangalore. Infosys and
Wipro pointed toward flattish budgets of clients in this year.
However, MindTree expected a marginal increase in budgets.
NASSCOM’s projection and Cognizant’s CY12 revenue guidance
indicated a better second half in terms of demand environment.
We revisit and tweak our earnings estimates. Our preference
among large caps is Infosys, TCS and HCL Tech in that order.
Among mid-caps, we prefer NIIT Tech, MindTree and Hexaware.
Clients’ budget frozen – Clients have broadly finished their budget
exercise and the global macro uncertainty is likely to delay
discretionary spending but thrust offshoring. The momentum in
project ramp-up is expected to begin from Q1FY13.
NASSCOM projection provides some direction – Companies have
not revealed their hiring plan for the next fiscal. But the large tier
firms have given a commentary to outperform the guidance.
Aggressive mid-tier IT firms confident to grow above industry
average.
Competitive pressures leading to innovation – Due to soft demand
environment, firms want to innovate through IP revenues and build
expertise in emerging technologies like cloud computing and
mobility. This will allow participation in complex and innovative deals
which are incrementally growing at faster pace.
Mid-cap IT firms’ growth and margins – A few mid-cap firms have
kept the revenue growth momentum to match the higher end of the
spectrum. Margin fluctuations in certain companies have been higher
leading to uncertainty. The possibility of pricing increase in FY13 is
low hence levers like offshoring, utilisation will come into play.
Companies with good revenue growth momentum can benefit from
change in employee mix.
Top picks - Infosys among large caps; NIIT Tech, MindTree and
Hexaware among mid-caps.
India Equity Research Reports, IPO and Stock News Visit http://indiaer.blogspot.com/ for complete details �� ��
“Budgets frozen, waiting for spending”
We recently met the management of Infosys, Wipro, MindTree
and Sasken at their corporate offices in Bangalore. Infosys and
Wipro pointed toward flattish budgets of clients in this year.
However, MindTree expected a marginal increase in budgets.
NASSCOM’s projection and Cognizant’s CY12 revenue guidance
indicated a better second half in terms of demand environment.
We revisit and tweak our earnings estimates. Our preference
among large caps is Infosys, TCS and HCL Tech in that order.
Among mid-caps, we prefer NIIT Tech, MindTree and Hexaware.
Clients’ budget frozen – Clients have broadly finished their budget
exercise and the global macro uncertainty is likely to delay
discretionary spending but thrust offshoring. The momentum in
project ramp-up is expected to begin from Q1FY13.
NASSCOM projection provides some direction – Companies have
not revealed their hiring plan for the next fiscal. But the large tier
firms have given a commentary to outperform the guidance.
Aggressive mid-tier IT firms confident to grow above industry
average.
Competitive pressures leading to innovation – Due to soft demand
environment, firms want to innovate through IP revenues and build
expertise in emerging technologies like cloud computing and
mobility. This will allow participation in complex and innovative deals
which are incrementally growing at faster pace.
Mid-cap IT firms’ growth and margins – A few mid-cap firms have
kept the revenue growth momentum to match the higher end of the
spectrum. Margin fluctuations in certain companies have been higher
leading to uncertainty. The possibility of pricing increase in FY13 is
low hence levers like offshoring, utilisation will come into play.
Companies with good revenue growth momentum can benefit from
change in employee mix.
Top picks - Infosys among large caps; NIIT Tech, MindTree and
Hexaware among mid-caps.
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