No mega deals, but IT cos' order book healthy
Indian software firms continue to get more recurring type of deals every quarter as global demand on the rise
The $7.6 bn TCV is broad-based and not skewed to a particular deal or region. We have seen demand across regions and sectors. The company's year-to-date TCV is $23.3 bn, said Rajesh Gopinathan, CEO and MD of TCS
- TCV (total contract value) intact as demand growing across regions and sectors
- IT cos get a mix of large and mid-sized contracts
- Infy received 25 large deals of $50mn each
- 44% of Infy deals are new ones
- Wipro says its order book remains robust despite no mega deals
- Mid-tier IT firms' order book also comprised many mid-sized deals
Indian IT services firms continue to witness robust deal pipeline during the third quarter of this fiscal year, raising hopes of posting double digit revenue growth in the next fiscal. This robust order book has come despite near absence of mega deals, which were the biggest reasons for pushing the top lines last fiscal year. In contrast, deal pipeline comprises a healthy mix of large and mid-sized contracts in Q3 of FY22.
"The $7.6 billion TCV (total contract value) is broad-based and not skewed to a particular deal or region. We have seen demand across regions and sectors. The company's year-to-date TCV is $23.3 billion," said Rajesh Gopinathan, CEO and MD of Tata Consultancy Services. Similarly, second-largest IT firm Infosys' large deal wins accelerated with TCV of $2.53 billion in Q3.
"Our overall pipeline is the largest we have had in a very long time. The number of large deals that we would able to close was 25 large deals each over $50 million for a total of $2.5 billion and 44 per cent of these are net new ones. So, all of those things are giving us a good confidence for what we see going ahead," Salil Parekh, CEO & MD of Infosys.
He, however, indicated that there were no mega deals closed in the quarter.
Large companies like TCS, Infosys, Wipro and HCL Technologies have benefitted from mega outsourcing contracts that have an incremental revenue addition potential of above $500 million. Typically, these deals are multi-year in nature. During the post results analyst call, Wipro's CEO, Thierry Delaporte had similar views on the matter. He said that despite not having any mega deals, Wipro's TCV remained almost at the similar levels due to a healthy mix of large and mid-sized deals.
"I think we have turned the engine into a way that we have more recurring type of deals every quarter, so that the mega deal comes on top," Delaporte said.
Not only large IT firms, but also mid-tier IT firms also said that the orderbook comprised many mid-sized deals.
Analysts are of the opinion that mega size cost takeout deals are very few in numbers in the market. "It's a good sign that IT services companies are reporting healthy orderbook despite absence of mega deals. A mix of large and mid-sized deals reduce dependency on single contract and provides a better visibility in terms of revenue growth," said Pareekh Jain, an IT outsourcing advisor & Founder of Pareekh Consulting.