Even as revenue and profit metrics slump for Indian IT firms, deal wins continue to remain robust, despite a downturn in the industry. However, the uncertainty in the macro environment is preventing the companies from capitalising on the deal wins in the near term.
For the three IT majors that have posted second-quarter results, Total Contract Values(TCV) have risen. Infosys’ large deal TCV increased to $7.7 billion from $2.3 billion last quarter. HCL Tech recorded order bookings of $3,969 million, with 16 large deals, up from $1,565 million last quarter.
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TCS also noted that its order book has been exceeding $10 billion TCV since the last three quarters. However, the revenue translation of these deal wins is being marred by the uncertain macro-environment. “Even after bagging significantly higher deal wins, the annual contract value (ACV) continues to remain lower with long-term contracts,” notes Prashanth Tapse, Senior VP (Research), Mehta Equities Ltd.
Cautious on spend
Omkar Tanksale, a Research Analyst at Axis Securities, attributes recent deal successes to the increased systemisation and automation of processes, which boost growth and cost efficiency. Additionally, the growing interest in Artificial Intelligence (AI) is a significant driver of these wins, promising technological advancements for companies.
“However, at the same time, companies are not ready to make the expenditure just yet and start the billing process as they fear recession to be impending and do not have visibility on the macro environment will shape up,” he noted.
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Company executives, too, recognise the scenario. TCS’ CEO K Krithivasan at an analyst call said, “We secure deals as customers trust us to build new tech capabilities, but market uncertainty prompts them to conserve cash. Further project closures and reprioritization are resulting in revenue growth moderation, and the duration of these challenges is uncertain.”
Similarly, Infosys CEO Salil Parekh noted that the deal wins ensure robust positioning in the future but decision making continues to be slow in today’s scenario. The company expects the deal ramp-ups towards the later half of the year.
Published on October 16, 2023
