Companies & Sectors
Infosys and TCS may report soft growth in March quarter

According to Nomura, while Infosys and TCS would show soft growth, other companies like HCL Technologies, Wipro and Tech Mahindra would show stronger growth during the March quarter

Tata Consultancy Services (TCS) and Infosys, the country’s too two IT companies, are likely to report soft growth while companies like HCL Technologies, Wipro and Tech Mahindra would show stronger growth during the March quarter, says Nomura.


According to Nomura’s report on Indian IT sector, Infosys expects to be at the lower end of its FY14F guidance of 11.5%-12% on US dollar revenue growth, which implies a 0.4% quarter-on-quarter fall in 4QFY14F. Infosys attributes the revenue weakness to: (a) retail and hitech segments; (b) skill mismatches leading to delay in ramp-ups and (c) project cancellations/rampdowns. These factors are likely to continue to impact growth in first half of FY15, Nomura said.


The report said, TCS had indicated that in line with seasonality, 4Q revenue growth will be weaker than 3Q, with the India business continuing to show a decline (though the decline is likely to be lower than the decline in 3Q of 9% quarter-on-quarter in rupee terms). Latin America and Europe are likely to show better than the company average growth and the US is likely to grow in line with the company average.


Talking about HCL Technologies, the report sees a 3% quarter-on-quarter growth. Deal signings have been strong for the company in the last four quarters with cumulative deal TCV (total contract value) of $4 billion.


Nomura said it expects 3% quarter-on-quarter growth at Tech Mahindra on account of: (a) deal signings of US$1 billion over the last three quarters; (b) strong growth at top Clients, other than British Telecom (BT) (c) Comviva typically has a stronger 2H, which should offset the decline from cessation of BT-related restructuring revenue in



Wipro has guided for 1.8%-3.6% quarter-on-quarter growth in 4Q and has indicated that it is tracking in line with the guidance. Its growth will be better in FY15F on: (a) the continuation of strong growth momentum in Europe; and (b) macro improvements in the US starting to reflect in better demand, the research note said.


Nomura’s comparison of valuation of India’s top IT companies is given in the table below:



Slow growth and high rates to stay for a while longer in India

General elections outcome in May is critical to improvement in growth mix, which includes, increasing capex and lowering fiscal deficit, says Morgan Stanley in a research note

The outcome of general elections in May 2014 will be critical to determining the pace of recovery in India, says Morgan Stanley. Considering the constraints facing domestic demand, the strength of the overall growth improvement will depend largely on improvement in exports in the near term and measures to boost productivity in the medium term, it says in a research note.


“A meaningful recovery in private capital expenditure (capex), government spending or private consumption will be difficult to achieve over the next six to twelve months in the Indian economy, while policy makers focus on improving macro stability indicators, such as inflation, the current account deficit, and banking sector balance sheets. Industrial companies will also need to de-lever their balance sheets (average debt equity ratio of industrial companies is at 2:1),” the note added.


Morgan Stanley observes that in terms of government policy post-elections steps must be taken towards: (a) fiscal consolidation for sustained improvement in macro stability; (b) moderating rural wage growth to be in line with the productivity trend; (c) improving the investment outlook by reducing regulatory hurdles, and (d) cleaning up public sector banks' balance sheets and infusing capital.


In the context of CPI inflation remaining above 8% in the near term, Morgan Stanley expects Reserve Bank of India (RBI) to keep policy rates on hold at the next monetary policy meeting. Seasonally favourable factors in 1H FY2015 would help to improve liquidity conditions and result in some easing in short- term market rates.


Morgan Stanley expects the full-year F2014 current account deficit to narrow to 1.7% of GDP (vs. 4.8% of GDP in F2013) and further to 1.6% of GDP in F2015.


For financial stability, there is a need for adjustment in underlying deposit growth for sustained improvement in credit deposit ratio. While deposits have been growing at a faster pace than credit recently, underlying deposit growth adjusted for Non- Resident Indian (NRI) deposits is still slower than credit growth, indicating that the underlying adjustment process of lifting deposit growth above credit growth is still not complete. Morgan Stanley believes that as CPI (consumer price index) inflation moderates and real rates build up gradually, they will help to improve deposit growth, which is required to correct the persistent gap between credit and deposit growth.


Morgan Stanley’s snapshot on macroeconomic forecasts is given in the table below:


India-Sri Lanka bilateral trading can reach to $10 billion

Indo-Sri Lankan bilateral trade has the definite potential to reach $10 billion in the next few years, if efforts are made by both sides, considering the existence of free trade agreement signed way back in 2000

Sri Lanka, our southern neighbour, occupies a close, strategic and religious association and connection with India, from time immemorial. True, there was a brief period of problems created by LTTE and with the elimination of Prabhakaran in the north, peace has slowly returned to this emerald Island.


It is predominantly an agricultural country and, has been a leading grower of quality tea throughout the world for almost a hundred years now. It may be remembered that the back bone of the plantation workers were originally from India (mostly Tamils) who were taken to the island by the British masters, and who has stayed there all these years.


Sri Lankan imports are a little over $20 billion and the imports about $11 billion, according to information published by the Ministry of Commerce, Government of Sri Lanka, for the year ending 2011. It has a large non-resident population of working men and women in the Middle East, who are the biggest foreign exchange earners, and who, dutifully remit the funds back to the country. It traditional exports, apart from tea and spices, are textiles, apparels, pharmaceuticals, precious stones like diamonds, rubies and emeralds. Other items of importance are rubber and rubber products, coconut, fish etc.


Only recently, Cairn India has discovered some gas offshore and further explorations are underway. However, the country continues to import petroleum and allied products, textile fabrics to support the apparel industry which is well organized in the country, mineral products, steel and allied products, foodstuffs and transportation equipments are the major items.


Imports of many of these items come from India, and the Indian share in 2011 (calendar year) was 21.3%; China was a close second with 16%; Singapore at 8.6%; Iran at 7.7% UAE 4.4% and Malaysia at 4.3%.


Indo-Sri Lankan bilateral trade has reached $5 billion and has the definite potential to reach $10 billion in the next few years, if efforts are made by both sides, considering the existence of free trade agreement that was signed way back in 2,000!


Being India's closest neighbour, Sri Lanka is also subject the whims of the Monsoon which can play havoc in its agriculture. The last monsoon, unfortunately, was insufficient and has brought untold misery to its farmers.


Media reports indicate that the ensuing harvest is likely to be much less than half of what was obtained last year, particularly for the Northern province. Rice cultivation has been hit hard and for the "aam aadmi" in Sri Lanka, the main food on the plate has been traditional rice with dry fish! There is fear about the New Year celebrations, which falls around the middle of April (and it coincides with the Tamil New year for the Sinhalese, which comes a day before or after).


In so far as fishing is concerned, the Tamil population on either side, both the Sri Lankan Tamils in the north and the Tamils from Tamil Nadu, have been at logger heads, each accusing the other for poaching in "their" waters, with Lankan Navy playing a role, causing heartburn to both!


According to information available, the Northern Provincial Council has been trying to obtain foodgrains from farmers' cooperatives for supplies to the people, but this is not happening, simply because the last monsoon was not bountiful; there is not guarantee, at this stage, that the ensuing monsoon will be adequate to drench the parched lands!


Estimates vary, but overall production of rice may fall between 25% and 35% of the requirements. Already small quantities of rice are being continuously imported, in the last few months from Thailand, China and India.


Sri Lanka may be heading for a food crisis and the only way they can manage to overcome the current impasse by immediate imports of foodgrains, such as rice, wheat, maize and items like sugar and pulses.


India must not wait for Sri Lanka to approach for assistance. India must offer all that is required, if necessary, on medium to long term credit all these items. Our marketing effort in that country has been inadequate, to say the least.


Sri Lanka is our friend; it needs assistance and India must volunteer to meet this need.


(AK Ramdas has worked with the Engineering Export Promotion Council of the ministry of commerce. He was also associated with various committees of the Council. His international career took him to places like Beirut, Kuwait and Dubai at a time when these were small trading outposts; and later to the US.)



Dr Anantha K Ramdas

3 years ago

dear tee wee:

I understand your sentiment but please remember that majority of the sri lankans have looked upon India as as an elder brother and we have too many common traditions that we cannot overlook because of this or that politician from one country or another.

Politicians are just interested in themselves. It is the people, by and large, who make the country. It is not in the interest of Sri Lanka or India to think that we do not need each other. We do.

If there are differences in our approach to a problem, these can be resolved by being together. Every country has its own quota of bad politicians and people must learn to avoid them, not elect them to power.

I am sorry you appear to have had some unfortunate experience and I have had the opportunity to deal with thousands, really, thousands of sri lankans in my life time and we both had never ever problems.

Please forgive and try your best to forget the unfortunate incidents, and let us carry on our lives and leave a better legacy for our children.

tee wee

3 years ago

Sri Lanka should reduce our trade activities with India to have a better control over our Industrial development. History shows India created LTTE to paralize our economic growth when Indira Gandi became the world's second Female Prime minister. Of Course worlds'first female Prime Minister was Srima Bandaranayaka, lead the country country toword prosperity and shown the world her credibility of leading the country to be a developed nation. However mentally disturbed Indira Gandi with her under mined activities she created LTTE in Sri Lanka to destroy our potential Growth. Ghandi regime trained LTTE in India physically.
Also in history shows that we never did lein on to Indians. Sri Lanka should reduce our business just enough to have friendship as Indian politicians are snakes on grass.

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