Shares of information technology (IT) companies fell in a firm market on Wednesday after Cognizant Technology Solutions hinted at slower growth in 2013. This heightened worries that other software exporters could also be impacted.
The Bombay Stock Exchange (BSE) IT index on Wednesday dropped 1.22 per cent to 5,779.43, while the benchmark Sensex rose 0.23 per cent to 19,391.86.
Bangalore-based Infosys and Wipro were the worst-hit with each falling nearly two per cent. Meanwhile, HCL Technologies declined 1.27 per cent and TCS ended just 0.1 per cent lower.
In a filing to the US market regulator Securities and Exchange Commission (SEC), Cognizant said its top executives will earn 100 per cent of performance-linked shares if its sales expand by 16 per cent to $8.5 billion for the year ending December 2013. Cognizant is said to grow the fastest in 2012.
|GROWTH WOES |
IT stocks declined on growth concerns despite firmness in the broader market
| ||Dec 5, 2012 (Rs) ||%chgange ||YTD chg (%) |
|Infosys ||2,382.30 ||-1.93 ||-13.84 |
|Wipro ||381.00 ||-1.83 ||-4.46 |
|TCS ||1,297.15 ||-0.10 ||11.70 |
|HCL Technologies ||638.50 ||-1.34 ||64.46 |
|BSE IT Index ||5,779.43 ||-1.22 ||0.48 |
|Sensex ||19,391.86 ||0.23 ||25.47 |
|*change over previous closed Source: BS Research Bureau |
Analysts said Cognizant’s lower 2013 growth projection didn’t bode well for the Indian software exporters. “We view this development as negative for Indian IT as well, where there are expectations of revenue growth acceleration being built in by consensus for the next year,” said brokerage firm Nomura in a client note. “We see higher risk to these expectations at Infosys and Wipro where revenue growth rates assumed in FY14F are more than double that assumed for FY13F,” it said.
Foreign brokerage CLSA in a note to its clients said that Cognizant’s growth expectations imply at best 8-14 per cent growth for Indian IT services exporters.
In recent years, Cognizant’s revenue growth forecast has more or less been in line with the growth target it sets for its senior executives. Also, the company’s revenue growth is several notches higher than that of other Indian IT firms.
For 2012, the company is expected to post revenue growth of 20 per cent, nearly double that of the projected growth of Indian IT industry. Industry body Nasscom expects Indian IT services exporters to grow by 11 per cent for the year ending March 2013.
The BSE IT index has underperformed the broader market by 25 per cent so far in 2012. It has risen just 0.5 per cent for the year, while the Sensex is up 25.5 per cent during this period.
Infosys has declined about 13 per cent, while Wipro is down nearly five per cent this year so far. These two IT majors are growing at a much slower pace than rivals.