Coronavirus: Revenue of Indian IT services cos could be hit, says Kotak report

Revenue of Indian IT services companies is likely to be hit as coronavirus outbreak forces clients to enforce travel restrictions, and their deteriorating health could potentially lead to reduction in budgets, as per a report by Kotak Institutional Equities.

The report said it has cut growth estimates across companies and the revised growth forecast stands at 3-8 per cent for 2020-21.

"We cut revenue growth estimates for our coverage companies by 2-4 per cent after COVID-19 intensified in developed markets with many clients issuing travel advisories and instituting work-from-home measures, and deterioration in health of clients of IT companies that will potentially result in spending controls and reduction in budgets," it said.

Kotak said COVID-19 has intensified in western economies in the past few days, and many clients have instituted work-from-home measures and issued travel advisories.

"Impact on IT companies is a function of the duration and the lens through which clients view the current challenges. For now, clients across verticals have not pulled projects or programs," it said.

However, this could change since allocation of budgets to new programs starts picking pace in March/April, it pointed out.
"Any delays in allocations will result in companies reporting a weak June 2020 quarter," it added.

June is a seasonally strong quarter and weakness in the same could impact growth for the entire financial year, Kotak noted.
In addition to and partly as a consequence of COVID-19, client health has started deteriorating across many verticals, it said.

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Around 70 cases of coronavirus victims have been reported.