Sanguine than thought
We hosted 13 companies/industry experts in our Business Services Conference on February 6, 2018. While key takeaways from our interactions are detailed in the ensuing slides, following are some of the key pointers:
* AXISCADES aspires to achieve Rs. 10bn in revenues, double digit EBITDA margins over the next 2years. Company expects acceleration in top 5 customers while new customer wins have the potential to grow to US$ 2 mn+.
* eClerx Services’ FY19e commentary appeared constructive led by ongoing recovery in strategic accounts and acceleration in emerging clients.
* HCL Technologies’ believes worst is likely behind in IMS while recovery in application business, and traction in engineering (both organic and Geometric) business could aid FY19e.
* Industry experts from Offshore Insights and NASSCOM believe that BFSI spending appears to be improving given challenges are moderating and that ccommentary from individual companies continues to be encouraging. Spend focus largely remains on cost takeout, risk, and business value.
* KPIT Tech’s FY19e growth would be led by Engineering business while IT Services business could aid. Overtime margins could increase driven by changing mix and operational efficiency.
* L&T Tech services’ FY19e commentary remains optimistic with double digit revenue growth likely. Growth is backed by traction in large customers, order booking and growth across key verticals.
* Mastek aims to sustain FY18e-similar growth in FY19e driven by UK and US businesses. Company is witnessing incremental opportunities post Brexit and the US business would be aided by TAISTech.
* Mphasis’ FY19e commentary suggests Direct Core revenues could grow better than industry average led by wins in NewGen services, while HP channel revenue assumptions are supported by 5year/US$ 990mn revenue commitment.
* NIIT Technologies believes specialized positioning (focus on key verticals like travel and transportation, BFSI ) and order bookings could support FY19e growth, while EBITDAM trajectory is on the rise.
* Nucleus software is present across the entire lending value chain (loan origination, servicing and collections) and our sense is that it is on a journey of changing its DNA from being a large customized implementation player to a Software company.
* TeamLease commentary was optimistic as the company believes revenues could grow 20-25% CAGR over next 3-4 years along with improvement in EBITDA margins. The company expects higher contribution of variable mark-up could improve overall mark-up, while its platform strategy could improve staffing productivity.
* Tech Mahindra appeared confident of sustaining current growth/margin momentum. Telecom business could grow mid-single digit in FY19e (majority of the bad news is priced in) while Enterprise business could grow high single/low double digits. Incremental negatives in the spending pattern of a large client involved in merger could be key risk to telecom growth assumptions.
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