Problematic meet of Indian IT giant at Nasscom’s growth target

 Highlights
• Big four IT companies may not be able to meet Nasscom’s growth target for FY16
•The growth guidance of 12-14% will now depend on captives and BPOs pulling their levels up
• There’s a greater sense of cautiousness among large IT firms
Big four IT companies may not be able to meet Nasscom’s growth target for FY16, and the industry may just be able to meet the lower end of the guidance even as a tough second half looms. The growth guidance of 12-14% will now depend on captives and BPOs pulling their levels up.

Nasscom was waiting to see how the third quarter plays out before taking a call on cutting the outlook, said a person with knowledge of the matter.

“Based on our analysis of the industry performance of the first two quarters, we are hopeful that the industry will meet its guidance of FY2016 in constant currency. The second quarter has seen good performance from companies and demand for digital continues to drive new business,” said Sangeeta Gupta, senior vice president at Nasscom.

Infosys chairman R Seshasayee said increased volatility will be the new normal, and the industry and companies will have to find a new way to issue guidance to combat it.

“The planning cycle at companies and at the industry level has to get shorter. Guidance needs to be re looked at — giving a set target a year in advance may not be the best way. The idea could be giving shorter term targets while keeping the overall direction firm. You would need the stake holder community to also get on board,” Seshasayee told ET in an interview on Wednesday.

Part of the problem this year, in addition to currency, has been the disruptions that hit emerging markets after the guidance was issued in February, raising questions about the setting of this process.

The Chinese stock market crashed and the economy slowed down, the price of oil has not rebounded as anticipated, and commodity prices have weakened further.

Wipro is expected to report about 9% growth for the year in constant currency. Infosys maintained its constant currency guidance of 10-12% for the year, just meeting the lower end of the guidance.