IT industry may struggle to meet Nasscom guidance

IT company HCL Technologies reported encouraging numbers for the December quarter, beating analyst expectations on the revenue side. Driven primarily by an uptick in infrastructure services, the company beat all its biggest rivals in top line growth - HCL reported revenues of $1.5 billion, up four per cent over the previous quarter. In comparison, India's largest IT services firm TCS reported flat growth while Infosys and Wipro grew 0.8 per cent and 1.3 per cent, respectively. HCL's net profit grew 2.3 per cent over the previous quarter to Rs 1,915 crore.

What do the numbers mean for overall IT industry growth? Industry lobby body Nasscom expects exports to grow 13-15 per cent in 2014/15 - exports had grown by 13 per cent in 2013/14. While demand remains strong, it is unlikely that the industry would match up to Nasscom's guidance, at least in reported terms because of currency fluctuations. According to Sanjeev Hota of brokerage Sharekhan, in the nine months to December 2014, the top four companies - TCS, Infosys, Wipro and HCL Tech - managed cumulative growth of 11.8 per cent on a reported basis compared to the year-ago period.

Apart from currency headwinds, Indian IT services exporters are facing pricing pressure for commoditised services such as application development and maintenance. A second challenge now is plunging crude prices that could slow down discretionary spending from the oil and gas industries.

The HCL Tech stock was trading at Rs 1,790.70 around noon, up nearly nine per cent. The BSE Sensex was at 29,283.79, down 1.34 per cent.