TCS reports all-time high order book; Would Infy, Wipro and other IT peers follow trend? Find out

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NEW DELHI, Apr 16
While Tata Consultancy Services (TCS) recorded deal wins with the fourth quarter TCV at $13.2 billion and FY24 order book TCV stood at an all time high of $42.7 billion, experts and analysts said that deal bookings are expected to be steady for rest of the IT companies with several large deals in Europe.
Biswajit Maity, Sr Principal Analyst, Gartner, said, “The first half of 2023 began slowly with delayed and prolonged contract signings, and the anticipated improvements and acceleration in the latter half of the year failed to materialize due to factors such as the hype surrounding AI, frozen spending, and change fatigue among CIOs. Despite this, overall activity remained stable in most firms, with CIOs utilizing budgets before year-end.” These late-allocated budget funds will consequently be reflected as spending in 2024. “Looking ahead, there is an expectation of a return to IT growth, which will impact all major IT firms,” he added. The Indian IT services companies are expected to end the financial year 2023-24 on a weak footing with a Q4 earnings estimated to show subdued growth on account of the pressure on discretionary client spends and global peers lowering their near-term guidance.
TCS released its quarter earnings on April 12. Infosys, meanwhile, will release its Q4 earnings on April 18, HCL Technologies on April 26, Wipro on April 19, Tech Mahindra on April 25, and others during the following month. Sharekhan analysis stated that deal wins TCV for most IT service companies is likely to recover after the moderation in deal win TCVs in Q3FY24. “Management commentaries indicate that the demand environment has largely remained unchanged from the previous quarter. Large transformational deals are on hold while reprioritizing cost optimization programs continue. Revenue growth outlook for FY25 is relatively better as compared to FY24, however the demand recovery seems to be getting pushed towards H2FY25,” Sharekhan analysys report said. BNP Paribas stated that while the deal win announcements by IT services companies saw a month-on-month uptick in March 2024, total deal wins remained subdued with constrained discretionary demand. “The three-month rolling average of deal signings remained flat month-on-month. CTSH, TCS, ACN and INFO closed the most deals for the month. As per media reports, INFO has been able to expand its scope of work with Vanguard (not included in this month’s deal count). CTSH (8), TCS (7) and INFO (5) clocked the most deals in 4QFY24,” said Kumar Rakesh, VP-Equity Research, BNP Paribas. ICICI Securities report said that with clients continuing to scrutinise discretionary spends and focus on cost optimisation, demand commentary from IT companies may not be materially different vs Q3. “Lack of any green shoots in BFSI and retail do not give much confidence. Given the absence of mega deal announcements in Mar’24 quarter, we see order books being flat QoQ, with most deals focused towards cost takeout. Exception would be Persistent, which is likely to have strong TCV (approximately USD 500mn) aided by higher renewal component, in our view,” it said.

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