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Cognizant hopes revenue growth to exceed target in '13

Does not see the immigration bill impacting deal closures

Shivani Shinde  |  Mumbai 

If the macroeconomic conditions remain as they are now, Cognizant Technology Solutions Corp will see its revenue growth exceeding the estimated 17 per cent this year, according to a top official.

“We have provided for a strong growth rate. If the second (June) quarter plays out like this, we do believe there could be an upside. But we would not like to go ahead of ourself in terms of guidance. For now, we are very comfortable with our guidance,” Karen McLoughlin, chief financial officer of Cognizant, told Business Standard.

Software industry body Nasscom has projected a 12-14 per cent revenue growth for the Nasdaq-listed information technology (IT) company against its own estimation of 17 per cent. The company reported a 17 per cent year-on-year growth in net profit at $284.2 million (Rs 1,560 crore) for the quarter ended March 31.

For the first time, the company’s quarterly revenue touched $2.02 billion during January-March, representing a growth of 18.1 per cent. For the June quarter, Cognizant expects revenue to grow by 5.4 per cent with acquisitions and by 4.8 per cent on organic basis.

McLoghlin believes growth will come from verticals like financial services, retail and logistics and manufacturing. “Over the last few quarters, we have seen a pick-up in our banking vertical. If you remember, a year back, the banking segment was slow. That has changed towards the second half of last year. We are also seeing some of the regulatory spend kicking in, which we were not expecting to happen. Additionally we also saw good growth in the BPO (business process outsourcing) segment for insurance,” she added.

Growth in financial services was also evident in the March quarter numbers, which grew five per cent quarter-on-quarter and 23 per cent y-o-y.

The only reason the company sounded a bit cautious was the continued pressure it saw in the health care sector. The pharmaceutical segment continued to see pressure due to patent cliff issue. “But I think the real turnaround in the lifescience space will happen in 2014,” said McLoughlin.

Part of this confidence in maintaining its projection also stems from the fact that the company has seen robust growth in its social, mobile, analytic and cloud (SMAC) areas, which is expected to deliver $500 million in such services. “Both Horizon 2 and 3 have seen robust growth. Horizon-2 that includes BPO, infrastructure management and consulting is growing faster than the company average and now contributes 20 per cent to our revenue,” she said.

Cognizant is also among the few in the IT industry that has chosen to speak in detail on the ongoing debate over the US immigration Bill. McLoughlin maintained that so far, unlike what has been reported, there has been no impact on deal closures. “Many of our clients have approached us saying they are very clued into what happens in Washington. Clients are rather very proactively reaching out and working with us on the issue.”

However, for a company that is growing faster than peers, Cognizant reported a rise in attrition to 12.3 per cent in the March quarter, much higher than the 10.7 per cent in the preceeding (December 2012) quarter. “We are a large company and we go through performance cycle, and we focus on retaining the best people,” McLoughlin said.

Cognizant added 6,000 (net) people in the March quarter. Around 29 per cent of gross additions for the quarter were direct college hires, while 71 per cent were lateral hires of experienced professionals.

First Published: Sat, May 11 2013. 22:27 IST