Nasscom to review IT guidance for this fiscal after Q2 earnings

Indian IT major TCS today said that the company is seeing some sequential loss of momentum in its BFSI business in the Unites States. It also warned of softer Q2 on back of reduced spending by clients in financial business. The analysts are bearish on the entire IT pack and believe that the sector will underperform in coming quarters. However, industry body Nasscom says that various factors are the reason behind volatility in the sector.“There are different factors which are causing turbulences be it economic or progression in trajectory of different economies,” says R Chandrashekhar, President of Nasscom. IT companies are tilting towards digital business, which is a combination of digital and technological decision. Nasscom is sticking to its FY17 growth guidance of 10-12 percent. However, Chandrasekhar says that the guidance will be reviewed after second quarter results of software companies. Macroeconomic headwinds are there in US and clients are cutting discretionary spending in banking, financial space which is a negative for the whole sector, says Karan Taurani, Senior Analyst at Dolat Capital.There is a downward revision of growth for large-cap IT companies and the estimated industry growth rate of 10-12 percent is now expected to drop to 8-10 percent, he said.Below is the verbatim transcript of R Chandrasekhar’s interview to Latha Venkatesh & Sonia Shenoy on CNBC-TV18.Sonia: What has your reaction been to the warning bell that Tata Consultancy Services (TCS) has rung and the fact that perhaps it throws light on a larger issue that the sector cannot cope up with perhaps the newer technology like cloud computing etc how would you respond to that?A: We don’t comment on any individual company’s issues or performance. However, I will share our perceptions on the broader dimension of the industry as the whole. We definitely see that there are different factors which are causing some turbulence whether it is economic factors and the progression in trajectory of different economies in different geographies in the world or in different verticals.Banking, Financial services and Insurance (BFSI) in particular is particularly sensitive one because it accounts for a very significant percentage of the industry revenues and therefore what happens in the BFSI sector as a whole is a very critical factor for the industry.The second thing is that in a lot of these areas the move is clearly towards going digital. In going digital, companies have to take certain bids, they have to really figure out how they are going to rationalise their IT spending and what is going to be the approach towards going digital. That is not a pure technology decision. It is a combination of technology and business decision and that is complicated and compounded by the kind of economic turbulence that we see like the Brexit and what is happening in Europe and so on.The result of all this and the projection by a number of analyst of automation etc so all of these are factors which the decision makers on the clients side have to take into account and it is these uncertainties which to some extent are also the cause of little bit of delayed decision-making.Latha: I just want to know if NASSCOM is lowering its own guidance?A: At this point the question of our lowering our guidance does not arise at this stage. Normally, Q2 is a good quarter for the company. This is one where the performance is strong. We will certainly review the situation after Q2 results of the companies. However, at this point and NASSCOM’s guidance for the industry as a whole it is not for particular company or a particular group of companies and there we do see the growth trends within the industry in India, when you take across companies we see a continued growth in the GIC segment, new investments coming in. So, when you look across all of these that is what our guidance is based on.Our guidance is based on a far broader canvas than what will be looked at in this context. That is where the slight difference comes in, where the slight difference comes in between what you see when you look at one or two companies and what you hear from NASSCOM when we look at the industry as a whole.