India’s IT Industry Continues Moderate Momentum in Q1 FY19-20

Overview

India’s information technology (IT) services industry continues its moderate growth trajectory as two-thirds of the IT services companies covered in the report exhibited above average growth.  In this report, we analyze the revenues of India’s IT services sector for the first quarter of financial year 2019-2020 and compare these with the same period the previous year.  This follows closely ARC Advisory Group’s recent Insight on this sectors’ performance in the fourth quarter of FY 2018-19.

This report discusses the financial results of the top 18 India-based IT companies listed on the National Stock Exchange (NSE), Bombay Stock Exchange (BSE), or both.  We believe this Insight provides a representative sample of India’s IT market.  The suppliers included in this report recorded combined quarterly revenue of $15.8 billion, representing 7.5 percent year-over-year growth rate.  Six out of the 18 companies reported a year-over-year decrease in software or product revenues, while the rest showed growth in Q1.  The rupee appreciated by 3 percent during the quarter compared with the same period last year.

India’s IT Industry Supplier Revenues

This ARC Advisory Group report discusses the most recent quarterly revenue results of the major publicly traded IT services companies based in India.  We translated financials reported in Indian rupees to US dollars using an average exchange rate for the given reporting period.  Owing to this translation, some companies may show negative growth.  The suppliers’ reporting period for this analysis is the quarter ending in June unless stated otherwise.  We have considered the consolidated revenues for all vendors, including subsidiaries’ revenues, except for Wipro, for which we only considered IT products and services. 

3i Infotech reported total revenue of $40.6 million for the quarter ending June 30, 2019.  This represents a growth of  12.4 percent compared with the same period prior year.  Ninety-five percent of 3i Infotech’s revenues came from “IT Solutions” (software products & services, software development, consulting, and IT infrastructure services) and the rest from “Transaction Services” (IT-enabled services). 

Cyient reported revenue of $156.6 million for the quarter ending June 30, 2019.  The revenues declined by 2.7 percent year over year.  Geographically, revenues from the Americas contributed 55.4 percent, EMEA 28.1 percent, while APAC and others contributed 16.4 percent.  From the business unit perspective, contributors were – 38.8 percent from aerospace & defense; 11.3 percent from transportation; 13.2 percent from industrial, energy & natural resources; 4.9 percent from semiconductor; 3.6 percent from medical & healthcare; 9.2 percent from portfolio and others; and 19.1 percent from communications contributed in this quarter.  Industry-wise, revenue was 65.7 percent from aerospace and defense, 19.9 percent from energy and utilities, 13.4 percent from medical, 0.3 percent from communications, and 0.7  percent from portfolio, transportation and others.  Cyient has added 20 new customers in this quarter. Total employee strength was 15,043 at the end of this quarter.

HCL Technologies achieved total revenue of $2.3 billion for the first quarter, representing a 15.1 percent year-over-year growth rate.  Industry application services contributed 75.3 percent on IT and business services, and engineering and R&D services 16.9 percent and products & platforms contributed 7.8 percent in this quarter.  Geographically, 67.7 percent of revenues came from the Americas, 25.9 percent from Europe, and 6.3 percent from the ROW.  Vertically, manufacturing contributed 19.9 percent and financial services 20.3 percent and technology services contributed 18.9 percent and life sciences & healthcare contributed 12.8 percent, retail & CPG 9.5 percent, public services contributed 10.5 percent, and telecommunications 8 percent.  The total employee count in HCL was 143,900 in this quarter. 

Hexaware Technologies reported a total of $188.5 million revenues, representing 11 percent growth over the same quarter prior year. Vertically, banking and financial services (the largest focus vertical for Hexaware) contributed 39.8 percent; manufacturing, consumer 16 percent,  healthcare and insurance 19.2 percent; and travel and transportation 10 percent; and professional service contributed 14.9 percent.  Geographically, 76.8 percent of the revenue came from the Americas, 14 percent from Europe, and 9.2 percent from Asia Pacific.  Segment-wise, application development & maintenance (ADM) contributed 37 percent to the revenues, enterprise solutions 9.4 percent,  quality assurance and testing systems (QATS) 17.7 percent, business intelligence & analytics 12.3 percent, business process services (BPS) 8 percent, and infrastructure management services (IMS) 15.6 percent.  Hexaware’s employee count including trainees during the quarter stood at 18,294.  Hexaware added 5 new clients with TCV of $36 million in this quarter.

Infosys reported $3131 million revenues for the quarter ended June 30, 2019.  This represents 10.6 percent growth over the same period the prior year.  Vertically, 31.4 percent of revenues came from insurance, banking and financial services; 9.6 percent from manufacturing; and 7.7 percent from hi-tech; 15.8 percent from retail; and 6.1 percent from life sciences; and 13.8 percent from energy, utilities, resources & services; and 13.8 percent from communication; and 2.6 percent from others.   Geographically, 61.6 percent of revenues came from North America, 23.6 percent from Europe, 2.3 percent from India, and 12.5 percent from ROW.  Infosys and its subsidiaries had a total headcount of 229,029 at the end of this quarter.

KPIT-Birlasoft - Since January 01, 2019, the whole of engineering business is demerged under KPIT Technologies Limited (earlier KPIT Engineering Limited).  The company reported revenue of $111.7 million for the quarter ended June 30, 2019.  This represents a huge decline of 25.8 percent year over year.  Geographically, the Americas contributed 76.3 percent to KPIT’s Q1 revenues, Europe 12.4 percent, and ROW 11.3 percent.  Vertically, automotive recorded 14.5 percent, manufacturing 19.2 percent, energy and utilities 18.1 percent, BFSI 19.3 percent, retail and process manufacturing 14.3 percent, life sciences 14.6 percent.  Segment-wise, integrated enterprise solutions represented 33 percent of revenues, SAP practice 19.2 percent, and digital transformation (enterprise solutions) 28.6 percent, CAD 10.8 percent, and others contributed 8.4 percent.  The company added three new customers during the quarter, with total headcount of 10,085 employees at the end of June 30, 2019.

Mindtree reported revenue of $264.2 million for the quarter.  This represents 9.4 percent year-over-year growth in revenue.  Geographically, 73.7 percent revenues came from the Americas, 17.8 percent from Europe, 4.1 percent from India, and 4.4 percent from ROW.  Vertically, 39.4 percent of revenues came from technology, media and services; 21.6 percent from BFSI; 22.2 percent from retail, CPG, and manufacturing; and 16.8 percent from travel & hospitality.  Among service offerings, application, development & maintenance, contributed 50.6 percent; infrastructure and support 23.8 percent; independent testing 18.2 percent; and package implementation 7.4 percent.  The company added 12 new clients in this quarter.  The company’s employee strength was 20,935 at the end of June 30, 2019.

NIIT Technologies reported revenue of $139.6 million for the quarter ended June 30, 2019.  This represents a growth of 12.7 percent from the prior year.  Geographically, revenues from the Americas contributed 49 percent, EMEA contributed 35 percent, and ROW contributed 16 percent.  Vertically, banking and financial services contributed 16 percent; travel & transportation 28 percent; and Insurance contributed 29 percent; and others 27 percent.  Segment split is as follows – application development and management contributed 72 percent, business process outsourcing 4 percent, management services 17 percent, system integration and package implementation 1 percent, and IP assets 6 percent.  In Q1, the company added 11 new customers to its client list – five in USA, three in EMEA, and three in APAC.  The headcount was 10,297 at the end of this quarter.

Persistent Systems reported revenue of $119.6 million for the quarter ended June 30, 2019.  This represents a decline of 3.2 percent compared with the previous year.  Services contributed 78.5 percent while the IP-led business contributed 21.5 percent of Persistent’s business.  Segment-wise, infrastructure and systems contributed 45.8 percent to the total revenues, digital 22.7 percent, alliance 27.8 percent, and accelerate 3.7 percent.  Geography-wise, North America contributed 82.5 percent, Europe 8.5 percent, India 6.7 percent, and ROW 2.3 percent.

Ramco reported revenue of $20.2 million with a growth of 5.9 percent in the first quarter.  Majority of Ramco’s revenue came from markets outside India.  The company recorded an upward growth in this quarter.

Rolta reported revenue of $52.7 million in first quarter, representing a year-over-year decline of 44.5 percent as compared with the same period in the previous year.  Segment-wise, 22.9 percent of Rolta’s revenues came from enterprise geospatial & engineering solutions (EGES), while the remaining 77.1 percent came from system integration & enterprise IT Solutions (EITS).

Sasken reported revenue of $19.5 million for the quarter ended June 30, 2019.  This represents a marginal decline of 2.6 percent year over year.  Geographically, 40 percent revenues came from North America, 20 percent from EMEA, 27 percent from India, and 13 percent from APAC.  Services generated 67 percent of Sasken’s revenues with the rest coming from products.  Sasken group had a total headcount of 1,802 in this quarter.

Sonata reported total revenue of $304.5 million for the quarter ended June 30, 2019.  This represents a revenue increase of 18.4 percent year over year.  Geography-wise, 56 percent of revenues came from North America; 30 percent from Europe, including UK; and 14 percent from ROW.  Vertically, 28 percent of revenues came from outsourced product development (OPD), 26 percent from travel transportation and logistics (TTL), 28 percent from retail & CPG; and 19 percent from others.  Sonata added 7 new customers in this quarter. The employee count stood at 4,011 in this quarter.

Tata Elxsi recorded $52.2 million in revenue for the quarter ended June 30, 2019.  This represents a decline of 8.1 percent year over year.  Segment-wise, 82.2 percent came from embedded product design, 13.3 percent from industrial design & visualization, and 4.5 percent from system integration & support services.

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Keywords: IT (Information Technology), IT Services, Quarterly Supplier Revenues, Software Development, Business Process Outsourcing (BPO), ARC Advisory Group.