IT finance verticals face ride bumpy in 2015: Moshe Katri

The sharp rebound in IT stocks have put focus back on the industry. Moshe Katri, MD of Cowen & Co, spoke to CNBC-TV18 about budgeting and spending forecast in 2015.

Below is the transcript of Moshe Katri's interview with Sumaira Abidi and Reema Tendulkar on CNBC-TV18.Reema: Walk us through key findings?A: This is the ninth year that we are conducting annual spending survey and in general it was pretty mixed. It was a mix in couple of different ways – (1) the fact that this year the budget cycle is going to be overextended. Typically budgets are finalised by the end of January. Now it seems that budget will be finalised maybe a month or two later. This is a process that is taking place specifically in financial services and manufacturing verticals based on our survey.The other thing that we have seen was that the spending sentiment during the past 90 days deteriorated and it is projected that it will deteriorate during the next 90 days. If you put all these things together it means couple of things – (1) you probably going to have a weak choppy start for the year, it means that if budgets are going to be finalised later than usual, you will have less fresh dollars on new start of projects and then years when we have had this happen that would be in 2009 and 2012, the year is back and loaded. So this is what we seen based on the survey.Sumaira: If the India industry growth for 2014 is at 13 percent to 15 percent as NASSCOM had predicted, will CY2015 be a bit worse given that growth could be back ended?A: I would say couple of things – the good news is that based on our survey. IT budget will grow at the same trajectory as in 2014. In 2013 you had about 2-2.5 percent growth. In 2015 it is projected to grow at the similar rate. In ’09 and 2012 the projection was for budgets to moderate. So I think that the budgets are there but you do have two verticals that are going through some challenges and if they are not able to get their act together you may have that back and loaded. Net-net the translation for this is that best case scenario you will have an equal growth rate to 2014, worse case scenario maybe it is going to cost you couple of 100 bps. So you will have to wait and see.I would say that the financial services industry is having two challenges that they have to deal with right now – (1) adjusting their cost base to the fact that they have to pay some very significant fines to the regulator during the past year/year-and-a-half and that is impacting their appetite to spend and they are taking second look at the cost structure. That is why it is taking more than usual and (2) they are thinking about how to buy some of those, what we call social, mobile, analytics and cloud computing (SMAC) related technologies, the emerging technologies and that is also extending the budget cycle.