Last Monday, brokerage firm CLSA set a cat among the Indian IT pigeons. In one quick, broad stroke it downgraded the software sector to “underweight” from “neutral” and also scaled down TCS and Infosys to “underperform” from “outperform”, due to what it described as a weaker revenue outlook and travel visa issues. This certainly got the goat of the software sultans, and TCS used the rest of the week rubbishing the brokerage’s viewpoints.
CLSA had said visa rejection rates in the Unites States had climbed to 40%, rising steeply from 5% from about 18 months ago. The argument was that Indian tech firms would be unable to complete projects on time, with an understaffed army of code writers. In normal circumstances, tech firms would have let that pass. But not this time.
TCS was unusually quick to quell the charge. “On the matter of macro worries, we are not seeing any weakening of demand. Clients continue to fund new projects and ramp-ups are proceeding smoothly,” India’s biggest IT exporter said in a note to investors.
The fact that rejection rates have gone up is nothing new. It has been the case over the last one year or so. But would that trend hit the market as badly as CLSA predicts, is the moot point. At this juncture, it is difficult to believe that visa rejections will cast a long shadow on the Indian IT sector. Visa rejection rates are not uniformly 40% across all companies. That could be true in one or two cases, but the percentage could be lower in most firms. IT firms have started to tackle this issue by using technological means (telepresence, for instance) more often, disbanding the need to send a person across to the US every time.
But while companies like TCS, Infosys and Wipro can easily sail through this ‘tough’ phase, mid-tier firms may have to take these warnings a little bit more seriously. The macro-economic environment continues to be uncertain, made worse by the southern European financial crisis as also the setbacks in Japan. The telecom vertical, especially, has been lagging for a few quarters and those companies with greater exposure to the segment are bound to suffer more.
Having said that our software minds have always fought back and emerged stronger, whether it is the economic recession, America’s incessant anti-outsourcing tirade or the Satyam scandal. CLSA has punched, but it not likely to end up in a knockout.
Junior Premji makes a splash
Back home at Wipro, Rishad Premji is rising up the ranks. The young turk is clearly being fast tracked. CEO TK Kurien may be a very tough cookie, but it’s becoming quite clear who the hot seat will ultimately.
Source:http://www.financialexpress.com/news/Software-soaks-in-a-hard-punch/808997/
