Nasscom sticks to its guidance despite analyst scepticism

The information technology industry body, National Association of Software and Services Companies (Nasscom), today said it would maintain its annual guidance for growth despite the sombre outlook given by many analysts and tepid March quarter performance by IT companies. “We are not relooking at it right now. When we came out with the annual forecast in February, we had said that we will relook at it in October.

We will wait for the first quarter (of 2012-13) results to decide whether we need to revisit the annual guidance,” Nasscom Senior Vice-President Sangeeta Gupta said.

Nasscom had given a revenue forecast of 11-14 per cent for the industry for financial year 2012-13. Though many IT companies have given mixed signals after their fourth quarter results, analysts tracking the sector feel that double-digit growth is achievable.

Ankita Somani, a research analyst with stock broking firm Angel Broking Ltd, says a lower double-digit growth rate is achievable for the Indian IT sector. “The industry fundamentals are strong; a lower double digit growth is achievable. However, I don’t want to give any number as it would be like shooting in the dark. After July-August, some clarity would emerge about the market. But one thing is for sure, not all companies will see same rate. Vendor churning has increased considerably. While some may grow 25 per cent; others may log a lower growth,” she added.

Dipen Shah of Kotak Securities Ltd, the stock broking and distribution arm of the Kotak Mahindra group, also feels that it’s too early to revise the annual guidance for the IT industry.

One quarter is not enough time to decide how the industry would perform. After the first quarter, some clarity would emerge, then the industry body can revise its guidance, he added.

After the March quarter results, many analysts have become sceptical about the growth prospects of the Indian IT industry.

Infosys Ltd has set a guidance of 8-10 per cent, lower than Nasscom’s. Nasdaq-listed Cognizant Technology Solutions has reduced its full-year guidance to 20 per cent from 23 per cent.

Adding to this, the banking, financial services and insurance sector, one of the biggest, has shown weakness with deals taking time to ramp-up.

“Some sectors such as banking and financial are not doing good, so IT firms dependent heavily on banking would be impacted. But overall, I think the industry will be able to meet the higher end of the Nasscom guidance,” said Ganesh Natarajan, chief executive officer of Zensar Technologies Ltd and a former chairman of Nasscom.

GOING AHEAD Outlook on how IT & BPO firms see their businesses perform in FY13
Company (IT and BPO)	Annual guidance (full year) shared as of March 31, 2012	Management’s comment/change
TCS	Does not give guidance	NA
INFOSYS	8-10%	The guidance is a “statement  of facts”, based on the company’s visibility of  opportunities on the ground
WIPRO*	Negative to flat	Impact due to decline in  India business
COGNIZANT	20%

Lowered guidance from 
23% to 20 % HCL TECHNOLOGIESDoes not give guidanceNA GENPACT$1.86 – $1.90 billionRevised guidance upwards 
on the back of recent
acquisition EXL SERVICES$445 million to 
$455 million
(lower end)Likely to revise guidance 
downward if currency 
fluctuation persists *Wipro provides only quarterly guidance

“If at all, Nasscom should relook at the guidance after September,” said Natarajan. Zensar has given an annual guidance of 15-18 per cent growth.

Shashi Bhushan and Pratik Shah of financial services provider Prabhudas Lilladher, wrote in a report that uncertained still remained about the global economic recovery.

"We believe that uncertainty continues to remain in the global economic recovery. We believe that anaemic deal signing activity in 2011 has already started showing impact on the quarterly run-rate. The management commentary across the technology majors was highlighting some hesitation towards spending. We expect tier-1 to deliver volume growth of 10-14 per cent in FY13," the report said.