Grindtime show for IT majors

Tom Wambsgans, a prominent protagonist in the TV show Succession, characterised his management style as his ability to 'grind' while pitching for the CEO's post. The grinding abilities of CEOs of Indian IT companies will be put to the test as they seek to eke out revenue increases and protect margins in a challenging environment. The decision by Infosys to stop campus recruitments - the first time certainly in recent memory - underscores the scale of the challenge facing Indian IT companies.

TCS, Infosys and HCL Technologies, which have announced their results, still have enviable profits and margins. However, the worry is the subdued guidance. TCS does not give guidance, but its CEO told ET in an interview that growth will be in single digits. Infosys and HCL, the second- and third-largest IT companies, have both revised their revenue projections downwards, the former for the second time this fiscal. The problem is the slowdown in the core Western markets. In particular, the top Indian companies are large-scale service providers to the BFSI (banking, financial services, insurance) sector and clients in these verticals are becoming more cautious.

Indian companies could respond by diversifying their client base to sectors that could see growth even in a challenging global environment. These include natural resources (mining linked to EV supply chains are likely to see a boom), hi-tech and manufacturing, which may see a revival as both the US and Europe are engaged in state-driven efforts to boost manufacturing. Defence spending is likely to rise sharply, particularly in the US, in response to recent geopolitical events. Geographical diversification, including a focus on the growing Indian market, is another bet. Many new sectors could take off in India in the next few years, such as EVs, mobile phones and industries linked to renewable energy such as solar panels and green hydrogen. However, in the short term, IT companies would just be hoping that the US Federal Reserve engenders a soft landing.