IT to suffer slowdown till 2019-20: Prabhudas Lilladher's report

IT to suffer slowdown till 2019-20: Prabhudas Lilladher's report

A report by the brokerage firm, Prabhudas Lilladher stated that the Indian Information Technology service providers will face a rough market, with low operating margins till 2019-20.

The operating margins of IT giants - TCS, Wipro, Infosys and HCL Technologies currently swinging between 20 per cent and 26 per cent, overshadow the margins of global rivals like IBM, Accenture and Capgemini. However, the pricing pressure in traditional technology services and slow growth in evolving technologies are likely to deter the market for the Indian IT companies.

In recent times, the market saw an increase in the onsite investments and setting up of onsite delivery centres by the Indian IT firms. Wipro, Tech Mahindra and Mindtree in the recent times have acquired onsite-centric firms to develop new skills, thereby squeezing the operating margins, despite depreciation of rupee by over 45 per cent in the last six years.

Further, the US geopolitical scenario is speculated to weaken the profit margins and institutional operations of the Indian IT firms.

The report also emphasised the slow down in the IT stocks' performance over the past three years period, parallely suggesting that good capital allocation and steady buyback plans have been successfully adopted by the firms as saviour tactics.