Banks told to come up with action plan

Indian IT service firms are confident about achieving a better revenue growth in FY19 on the back of improving macro environment and higher deals in digital services.

According to Kotak Securities, which hosted nine IT firms in its annual investors conference, majority of the firms remained optimistic in their outlook across verticals except banking and retail where commentary differed.

“Most companies expressed hope of a stronger FY19, some backed by deals and others on the basis of a stronger macroenvironment across key geographies especially North America, stable profitability and increasing deal sizes in digital services. However, companies refrained from quantifying the magnitude of improvement,” it said and added that nearly all IT firms indicated that simplification and digital transformation of the core would drive up digital deal sizes.

The only area of differing commentary according to Kotak Securities was in the banking vertical where TCS believed that increase in in-house spending has impacted growth.

TCS indicated that performance of the banking vertical would be critical to achieve a robust double-digit growth.

According to it, balance sheets of banks are in good shape and macro factors are supportive.

However, translation of macro into spends and allocations of spend between in-house and third party players will be the key.

On the other hand, Infosys and Wipro were confident on banking vertical growth in FY19 but cited different reasons for their confidence.

“CY18 will be better than CY17 is generally accepted and shows up in IT sector re-rating. The magnitude of acceleration will determine stock returns from here as 2-3 per cent higher growth in FY19 is already factored into the stock prices,” Kotak Securities added.