IT companies on cloud 9 over surging digital outlay
Momentum is likely to sustain in 4th quarter as IT spend of financial services companies continues to rise amid rapid digitalization
Operating margin of Indian IT firms may contract in Q4 on high expenses
Bengaluru: Sound growth in the financial services vertical was one the major factors to drive revenue growth of Indian IT services companies in the third quarter ended December. Managements of both large and mid-tier IT companies are of the opinion that the momentum is likely to sustain in the fourth quarter as IT spend of financial services companies continues to rise amid rapid digitalisation.
In the third quarter ended December, Infosys reported 15.5 per cent rise in its BFSI (banking, financial services, insurance) vertical as compared to the same period of last year. BFSI vertical contributed 33.1 per cent to Infosys' third quarter revenue and was the biggest vertical of the Bengaluru-headquartered company.
"Financial services grew at 15.5 per cent in constant currency with broad-based growth across geographies and steady deal wins. Various subsectors like lending, mortgage, cards, payments, are seeing increasing demand and clients are driving cloud transformation initiatives to build resilient and scalable platforms," Salil Parekh, CEO of Infosys, has said in the post-earnings analyst call.
The company won five large deals out of 25 large deals clinched in the third quarter.
"The demand environment remains extremely strong and then more and more traction on the digital and the cloud programmes. There's also good momentum that we are seeing in financial services, given it's our largest vertical," Parekh said on the outlook.
Similarly, Tata Consultancy Services (TCS), which drew 32 per cent revenues from BFSI vertical, grew 17.9 per cent YoY in the third quarter.
For Wipro, BFSI contributed 35.2 per cent to its third quarter revenue. This vertical witnessed a strong growth of 4.1 per cent in sequential term in the third quarter. The company has started to benefit from its acquisition of financial services consulting major Capco.
"We are seeing the benefit of consulting -- of Capco's consulting edge in our large new pipeline. We are now winning in cloud transformation in engineering services, data, digital transformation and security. Our clients are continuing to place their trust in us who have them turn into digital businesses," Thierry Delaporte, Wipro's CEO, said during the analyst call.
Among mid-tier IT services companies, L&T Infotech's performance was one of the industry leading ones in the BFSI vertical.
The company drew 32.8 per cent of revenue from BFS (banking, financial services) vertical, while 13.3 per cent from insurance segment during the third quarter of FY22. While BGS grew 9.7 per cent in sequential term, insurance segment grew two per cent during this period. L&T Infotech's MD & CEO Sanjay Jalona recently said that the BFSI remained the biggest success story for the company as its offerings see rising traction among clients across the globe.
