See 13-14% rev growth in CY10 for IT industry: iGate

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See 13-14% rev growth in CY10 for IT industry: iGate

In an interview with CNBC-TV18, Phaneesh Murthy CEO, iGate gave his reading of the Indian IT (information technology) sector going forward.

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Excerpts from Markets Midday on CNBC-TV18 Watch the full show » RELATED NEWS Experts see double-digit rev growth for IT sector in FY11 IT sector roadmap: What 2010 holds ALSO READ See what other experts are saying about markets See what FIIs are saying about the markets See what Udayan Mukherjee is saying about the markets iGATE Solutions BSE | NSE 01/01/70 Are Mutual Funds betting on iGATE Solutions?

In an interview with CNBC-TV18, Phaneesh Murthy, Chief Executive Officer, iGate gave his reading of the Indian IT (information technology) sector going forward.

Below is a verbatim transcript of the interview. Also watch the video.

Q: From the initial earnings, which poured in, volumes have been a clear surprise. Do you sense it is going to be a very positive year in general for volumes?

A: Certainly, if you look at the macro picture, it is our read that the IT budgets are actually going up by roughly about 2-3% in the US - roughly about USD 600 billion spend in the US. That means about USD 12-18 billion of increase spent. Given the concern in the US about the double dip recovery - the W-shaped recovery as they call it - essentially what's happening is that corporates are kind of very reluctant to hire full time people now. So this entire business in effect is going to get outsourced.

Obviously, the largest beneficiaries of those outsourcing are the Indian providers. So to that extent, I do believe that for a couple of quarters, I see this 5-6% growth kind of getting sustained. After that it's a question of is there a double-dip whether there is a double dip and some of those factors will start playing out.

Q: Last year the financial services space got wacked but still most IT companies have reported decent numbers. What is happening out there? Is starting to pick-up?
 
A: The fact is that BFSI segment - banking and financial services particularly was the worst hit segment in 2009. It was the absolute down segment. It was ravaged and so on. They are having a significant uptick.

A part of the work is probably merger related, part is some of the integration work but there are lots of projects that need to be done. Business needs have not got less complex. Everybody is banking of a little bit of a recovery - most of the banks are showing sig profits and so at some point they have to start lending money again.

These are just new projects and initiatives, which are getting done. But BFSI will strongly lead the recovery. That's on the IT side.

There is this whole view that I have that a couple of years now, there will be ops led growth. So if you look at the ops budget - it is less that 3% is spent in India and its my read that that number will go up very comfortably in India to 15% over the next 5-7 years. Therefore there will be a big multipliers on the ops work coming to India. We are staring to see that happen in larger and bigger deals and so on.

Q: Any other sector popping up on your radar - sectors that may see good traction going forward?
 
A: I think many of the sectors will start showing growth. Clearly, there is healthcare where there is significant investment being done, it's a transformational play etc. So in the healthcare industry clearly one would start seeing growth.

The second thing is that in most of the others, I actually believe that they are a little more cautious right now. While there are a few more projects, the bulk of the spending will happen after news of this double-dip. So I think people will look for a bit of sustained recovery and then the spending will start in a reasonable fashion there. So there are some signs that purse strings are starting to get loosened and budgets are starting to come. But I think it's very cautious in many segment.

Q: All in all, will there be a double-digit growth for Indian IT in 2010-11?

A: About 2-3 months ago somebody had asked me the question and my take was about 13-14% for CY2010. That's what I think across the industry will be the average growth. I will be happy if I can revise that upwards over the next few quarters. But certainly the December quarter has given, if anything, that 13-14% number, a positive upward momentum.