IT firms having clocked a healthy Q2FY23, apprehensive of international slowdown

The next few quarters will see a moderation in large deals by IT firms as uncertainty looms, given the speculation of slowdown in Western economies, say analysts. Firms are seeing clients priortising deals that offer quicker wins, as indicated by the leadership in their Q2 commentary.

For the quarter ended September 30, IT majors reported healthy deal wins. Infosys saw its large deal TCV rise from $1.7 billion in Q1 to $2.7 billion in Q2. Wipro, too, said it saw a 24 per cent a year-on-year rise in deals at $725 million. HCL Tech’s new deals rose 16 per cent quarter-on-quarter at $2.38 billion. Tech Mahindra, however, saw a 10.72 per cent quarter-on-quarter fall in deal wins at $716 million.

Going forward, the momentum of deals might take a hit. Mitul Shah, Head of Research at Reliance Securities, told businessline: “There is uncertainty, particularly in the Western countries, which is the major contributor for Indian IT services. We have already seen the impact on the large deal wins of few players as they reported sizable sequential decline in Q2.”

Large players are witnessing some pressure. Going forward, large deal wins will continue, but there will be some moderation in terms of the size of the deal. Overall, deal wins may also come down from the recent high, he added.

Changing nature of deals
“Some of the larger transformation programs are seeing prioritisation of projects that offer quicker wins, versus those with longer-term paybacks,” TCS CEO Rajesh Gopinathan had said in his Q2 commentary. Clients have become more cautious when committing to longer-term investments. We have also seen some sporadic instances of delayed decision-making on new deals, he added.

Nitin Rakesh, CEO of Mphasis, had told businessline: “There is demand only for select services, not for everything across the board. Although cost-takeout sites are funded, there is an internal repriortisation happening, where some projects are getting de-priortised as the environment is in headwinds. The level of scrutiny on spends is higher now.” The Hindu Business Line