Industry analysis: India is the world’s largest sourcing destination, accounting for approximately 55 percent of the US$ 146 billion markets. The country’s cost competitiveness in providing Information Technology (IT) services, which is around 3-4 times cheaper than the US, continues to be its Unique Selling Proposition (USP) in the global sourcing market.
India’s highly qualified talent pool of technical graduates is one of the largest in the world and is available at a cost saving of 60-70 percent to source countries. This large pool of qualified, skilled workforce has enabled Indian IT companies to help clients save US$ 200 billion in the last five years.
India’s IT industry amounts to 12.3 percent of the global market due to exports. Export of IT services accounted for 56.12 percent of total IT exports (including hardware) from India. The Business Process Management (BPM) segment accounted for 23.46 percent of total IT exports during FY15.
The Government of India has extended tax holidays to the IT sector for software technology parks of India (STPI) and Special Economic Zones (SEZs). Further, the country provides procedural ease and single window clearance for setting up facilities.
Company overview: Indian Multinational IT company based in Noida, Uttar Pradesh. The company operates in IT consulting, remote infrastructure management, BPO, and Operating in many sectors like Aerospace, healthcare, automotive, consumer electronics, energy and other utilities, financial services, Govt services, industrial manufacturing, life sciences, media, entertainment, Mining, public services, retail and consumer, Semiconductors, Server and storage, telecommunications, transportation, logistics, hospitality. The Company has offices in 34 countries and ties with many big companies.
Even though the Stock is not performing well, the future Outlook is clear. Automation, including BPO, Application development, Infrastructure and engineering, and others, including cloud, is part of the company’s services. Cloud, IoT, and Security segments hold 20%-30% YoY growth potential per HDFC securities. However, revenue from Applications is not growing fast—the decline in percentage terms concerning Total revenue. Significant growth is coming from Infrastructure. But as per the company’s new plan, the company is concentrating on IoT and cloud computing. HDFC securities also highlighted that Wipro and INFOSYS Tier 1 revenue is not growing. HCL Tech is eating that segment. On some Frontier, HCL technologies performance is better than INFOSYS.
SHAREHOLDING Pattern: BSE Data
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Future Prospects: Around 60% of revenue comes from the US, and 30% is from Europe. Both have their challenges. IT in the current situation is facing a slowdown in IT Expenditure of many businesses, and many companies are reducing their growth rate expectations. But in a recent Analyst meeting, management was sound confident. Recently the FY 16 results were not so attractive, but the view of management and some Brokerage Houses are cheerful.
As I am tracking E-Commerce, I know the future potential for Cloud Computing and IoT; this company is better placed, having a network in the Sector. As automation and digital are still part of company revenue, it will be good Stock for a long-term portfolio. Invert if it suits your requirement.
