IT Sector Check - Commentary Points To A Weaker-Than-Expected December Quarter: Nirmal Bang

Nirmal Bang Report

Over the last few days, we have had the opportunity to listen to HCL Tech Ltd. (at its U.S. investor day), Cognizant (at an investor conference) besides a chance to interact with Infosys Ltd. investor relations team.

HCL Tech has indicated that growth for FY23 will come at the lower end of the range that it had indicated post its Q2 FY23 results (update) due to higher-than-expected furloughs (highlighted banking, financial services and insurance and hi-tech being problem areas).

We do expect this to be an industry-wide problem and not an HCL Tech specific one. While there was no discussion on specific numbers by either Infosys or Cognizant, we get the sense that December 2022 and possibly March 2023 are likely going to be growth challenged quarters for the industry; may be a bit more than earlier anticipated.

HCL Tech management commentary also highlighted another problem that we foresee in FY24 – pricing. It hinted that price increases are more selective now than they were six-nine months back.

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