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Talk of Indian IT industry’s death overstated: Rishad Premji

LiveMint logoLiveMint 14-09-2017 Varun Sood

Bengaluru: Rishad Premji, chief strategy officer and board member at Wipro Ltd, says the current discourse on the death of India’s $154 billion information technology (IT) industry is overstated.

The son of chairman Azim Premji remains optimistic that the steps taken by Wipro and other IT companies could propel double-digit growth over the next three-five years.

“I think this entire talk of death of Indian IT industry is overstated,” Rishad Premji, who in July completed 10 years at Wipro, said in a rare interview on Thursday. “I would submit the industry is very resilient…(with) the investments being made by us and by many players in the industry, I believe, the industry can continue to grow in double-digits over three-five years. I’m very confident that the industry will move in that direction.”

Premji’s comments come days after at least one equity analyst expressed scepticism about the road ahead for India’s four largest IT firms and Nasdaq-listed Cognizant Technology Solutions Corp.

“We find it difficult to believe that the industry can grow at 10% or above levels over the next few quarters given the weakness in core areas,” Keith Bachman, an analyst at BMO Capital Markets, wrote in a 10 September note.

Bachman added: “We think the India-based IT services sector is more likely to grow in the high- to mid-single-digit range over the next few years.”

For Tata Consultancy Services Ltd (TCS), Infosys Ltd, Wipro, HCL Technologies Ltd and Cognizant, revenue growth during the April-June period was the slowest since April-June 2014: revenue growth slowed to 7.6% year-on-year in constant currency terms in the June quarter, compared to 9.2% in the March quarter.

India’s third-largest IT services company, Wipro, reported 4.9% dollar revenue growth to end with $7.7 billion in revenue in the year ended March. Worryingly, for the first time since 2009-10, TCS, Infosys and Wipro, which together make up a quarter of the industry’s total business, grew at a slower pace than the industry’s 8.6% growth in constant currency terms in 2016-17.

All these companies have seen demand from their Fortune 500 clients slow in areas like application development and maintenance.

Although they are seeing demand for solutions like applications over mobile platforms or cybersecurity solutions (broadly termed digital), this has not been enough to offset the slowdown in traditional areas of business. For all IT outsourcing firms, digital revenue still accounts for less than a fourth of total revenue.

A case in point is Wipro, which claimed that digital revenue accounted for 22.5% of its quarterly revenue at the end of the April-June period this year.

For Wipro, revenue from digital offerings recorded 28% year-on-year growth to $443.63 million in the June quarter, as against $345.6 million in the year-ago period. However, Wipro’s overall quarterly revenue inched up 2% to $1.97 billion from $1.93 billion in the same period. This was largely on account of a 3.6% decline in traditional business to $1.52 billion from $1.58 billion, according to a Mint analysis.

Premji attributed Wipro’s below-par performance to poor execution, but said the initiatives taken by chief executive officer Abidali Neemuchwala should help the company match industry growth numbers by the end of the current fiscal year.

“(Abid) is on a terrific run in transforming the company over the last year…We have gotten out of the gates early…we have very boldly and disruptively made investments in those areas whether organically, inorganically or through a partner ecosystem…and if we get it right, the opportunities in this end-to-end digital transaction play is limitless,” he said.

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