IT firms expect utilities, communication help offset as biz from key sectors drop

Bengaluru | Mumbai: Indian IT services providers Tata Consultancy Services, Infosys and Wipro expect their communications and utilities verticals to clock steady growth, even as the core financial services, retail and travel segments take a hit due to the Covid-19 pandemic.

Clients in the travel and hospitality industry have already reduced existing and fresh technology services contracts.

Wipro reported sequential growth in energy and utilities and its health business unit in its fiscal fourth quarter. However, banking and financial services, which is its largest revenue earner, declined.

“(In segments such as) travel and hospitality, auto, oil and gas, industrial manufacturing we see higher impact. Communication, insurance, utilities will see lower impact. Consumer goods sector sees a change in demand, and they will continue to work well,” said Bhanumurthy B, chief operating officer of Wipro.

Infosys, India’s second largest IT services provider, said banks are expected to lower interest rates and insurance companies will receive lower premiums, impacting its revenue in the near term. All sectors will be hurt in the near term, but some such as communications will do well, it added.

“Retail, travel and hospitality, energy, oil and gas are most impacted. BFSI is going to be impacted in the near term…Communication is doing reasonably well,” said Pravin Rao, chief operating officer of Infosys.

TCS, India’s top software services exporter, has not yet called communications a ‘defensive’ segment yet despite the communication and media segment clocking 9.3% growth in revenue in the fourth quarter.

Rajesh Gopinathan, chief executive officer of TCS, said, “Communications is an even more mixed bag. While there are strong demand drivers with this whole shift to a digital operating model…on the media side, there is significant impact…”

He added, “Closure of amusement parks and other such facilities is also having a lot of impact. Closure of studios and the lack of new content will have downstream impact.”

Analysts expect new growth sectors to emerge.

“With the epidemic situation forcing people to work remotely, there will be investments in privacy, compliance, remote access and consumer experience. In e-commerce, customer experience and data security will see a significant investment,” said Sanchit Vir Gogia, chief executive, Greyhound Research.

Healthcare and pharmaceuticals, transportation, construction and real estate would drive higher demand, he added.

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