IT's back: Outsourcing volumes of Indian firms on the upswing

Bangalore: Outsourcing volumes of Indian IT companies in the first quarter have gone up, indicating early signs of bullishness in the $100-billion sector.

This is the first time in the last eight quarters that the volume of outsourcing work has gone up for large and medium-size companies. For example, TCS reported that volumes went up by 6.1 per cent, its largest in the past seven quarters.

Similarly, Infosys, which has had trouble in maintaining volume growth over the past quarters, surprised market watchers by posting a 4.1 per cent rise in its volumes. Cognizant, Wipro and HCL Tech are yet to announce June ending quarter results.

Industry watchers opine that these positive results bode well for the sector but added that regulatory changes such as US Immigration Bill in its current form can have a negative effect. Earlier this month, India Ratings and Research maintained its stable outlook on the Indian IT services industry for the second half of 2013.

Mid-size firms
However, analysts maintain that sustaining this growth momentum and impact of wage hikes would determine whether companies can continue this run. “While volume growth is positive, the key thing to watch out is whether this momentum can be sustained consistently,” said A.K. Prabhakar, Senior Vice- President-Equity Research at Anand Rathi.

Mid-size companies also saw decent volume momentum. iGATE reported 4 per cent growth and MindTree posted 4.1 per cent growth. Hexaware, another mid-size company, saw muted 1.5 per cent increase in its volumes when compared to the previous quarter but said that some of the deals that it is negotiating will spill into the next couple of quarters.

The June quarter also saw management bullish on the deal pipeline across most IT companies and some stability on the pricing it charges to its clients. TCS CEO Chandrasekaran pointed out that the company is seeing a pickup in discretionary IT spending, which comes with better margins.

Mid-size companies also indicated a better deal pipeline and some like Hexaware have indicated an upward revenue guidance for the next quarter, said Rumit Dugar, IT analyst with Religare Institutional Research.