Mid-tier IT firms beat big peers in Q1

Bengaluru: Mid-tier IT companies continue to perform better than their larger peers as reflected in the first quarter performance of ongoing financial year. Though the pressure on operating margins is obvious like their bigger counterparts, revenue growth was better for the most mid-tier companies. Despite fears of slowdown, even the outlook for future growth in coming quarters shows resilience of mid-tier IT services and engineering services companies in India.

"There are two messages we want to send out. We look at our house and it is all right. Secondly, we look at demand for digital services that continues to be strong," Venkatraman N, MD & CFO of Happiest Minds Technologies, told Bizz Buzz.

The Bengaluru-headquartered Happiest Minds Technologies posted 6.9 per cent sequential growth in its revenue in Q1 of FY23. It also raised its revenue growth guidance to 25 per cent for the current financial year.

Another mid-tier firm Coforge has upgraded its revenue guidance saying that it will grow its top line by at least 20 per cent in constant currency term. The management of Mindtree and L&T Infotech have indicated strong earnings outlook for the next quarter and beyond.

Engineering services firm L&T Technology Services has retained its revenue guidance by 13.5 per cent- 15.5 per cent for FY23. Similarly, both Persistent Systems and Tata Elxsi have posted strong quarterly performance during the quarter with robust deal pipelines.

"Both the lead indicators- hiring trend and deal pipeline show that demand environment for mid-tier IT firms remains robust. As compared to big IT firms, most mid-tier firms have seen rising rate of employee addition. Also, strong deal pipeline reflects that client spend in digital projects is not going through any slowdown," said Pareekh Jain, an IT outsourcing advisor & founder, Pareekh Consulting. In the first quarter, most large IT firms have seen drop in net employee addition numbers. But hiring momentum remains strong for all mid-tier companies. Tata Elxsi is planning to hire 5,000 employees in FY23, increasing its workforce of 10,000 by 50 per cent in the current fiscal year. Mindtree is planning to add similar number of staffers in the second quarter of FY23 as it has done in the first quarter. The Bengaluru-headquartered firm is planning to hire around 5,000 freshers in this fiscal year.

Persistent Systems added more than 3,000 staffers in the first quarter and while L&T Technology Services is planning to hire around 3,000 freshers this fiscal year.