Covid 2nd wave big hurdle for growth

India is facing a raging second wave of the Covid pandemic with over three lakh cases being reported daily. Similarly, European countries such as France and Germany are also going through large outbreaks relative to their sizes

Bengaluru: The nascent recovery seen in the aviation, travel and hospitality segments of Indian IT firms is likely to face a setback due to the raging second wave in India and many European countries.

The process of recovery is likely to be stretched by three to four quarters more owing to the pandemic. Overall, the growth in manufacturing vertical is expected to remain subdued, company officials said.

"Manufacturing was one of the vertical which was majorly impacted. But in the last couple of quarters, we have seen some spend come back both in industrial and automotive segment, whereas aerospace segment continues to be digital. So our sense is, it might take several quarters before we see normalcy in aerospace," UB Pravin Rao, the Chief Operating Officer at Infosys told analysts.

"Similarly, in the services side, travel and hospitality will probably take some time with multiple waves of pandemic happening," he added.

In the just ended fourth quarter, Infosys witnessed its manufacturing vertical growing by 3.4 per cent YoY in constant currency terms, which was one of the lowest among its verticals. Similarly, Tata Consultancy Services has also projected that manufacturing and travel & hospitality would take more time to come back to normalcy.

"Sequential growth numbers in manufacturing are much better than the year-on-year comparatives, reflecting the returning strength. But by far, no means has it fully recovered," said Rajesh Gopinathan, Chief Executive Officer at TCS during the post-results conference call.

Even mid-tier companies like Mindtree, which has more exposure to travel and hospitality segment, witnessed fall in its revenue contribution from this segment. The share of travel and hospitality vertical in the revenue contribution of Mindtree has come down to 9.9 per cent in Q4 of FY21 from 16.2 per cent a year ago. The Bengaluru-headquartered firm, however, has seen strong recovery in its travel & transportation segments, albeit on a low base, during the March quarter. Similarly, hospitality has also shown some green shoots in terms of solution.

Experts said that the nascent recovery in these verticals will come under pressure due to the second wave in India and many European nations.

Currently, India is facing a raging second wave of the Covid pandemic with over three lakh cases being reported daily. Similarly, European countries such as France and Germany are also going through large outbreaks relative to their sizes.

Even Brazil and the United States are also reporting around 70,000 cases per day. Amid this pandemic, travel and hospitality after showing some green shoots is again facing severe stress.

"While manufacturing will come back to normalcy as the pandemic fades away, it may take three-four quarters for the travel and hospitality vertical to come back to early growth path," said a Mumbai-based analyst. He, however, said that clients in the travel segment would continue to spend on selective digital projects.