Janmejay
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NEW DELHI: The Indian IT sector took 15 years to reach the $100-billion mark and now the improvement seen in global economy, industry consolidation led by M&A and new technology platforms can propel the industry to $200 billion in the next five years.
IT & ITES was one of the top performing sectors of the calendar year 2013. Currency fluctuation and marginal improvement in global economy have made the sector worth more than USD 100 billion as of today.
The year 2014 is expected to be better for the IT industry due to its diversification in analytics, mobility, cloud, social media and emerging verticals such as healthcare and medical services, said Tushar Pendharkar, Equity Strategist, Right Horizons Financial Services.
As per NASSCOM estimates, while Indian IT exports are likely to grow in a range of 13-15 per cent per annum, the domestic market is expected to rise by a modest 9-12 per cent due to election impact.
However, "over the next couple of years, the growth will remain better, in our view, due to expected recovery in the west, especially in the US, and expectation of stable government at home," said Nitin Prakash Daga, Vice President - Research at Microsec capital Ltd.
"With these factors expected to prevail, we expect the Indian IT sector to grow at a CAGR of 13.2-15.2% over the next five years," he added. Consequently, the industry size may expand to around $219-239 bn by FY2019 from $118 bn projected by NASSCOM for FY2014, says Daga.
Indian IT companies are now well recognised for delivering quality and have proved their capabilities of timely execution of projects and are best positioned to ride global recovery. The currency movement would also be a key trigger for the sector.
Despite strong appreciation seen in the rupee, the IT sector is one of the best trades and the best of IT is ahead of us, says Raamdeo Agrawal, Joint MD & Co-Founder, Motilal Oswal Financial Services Ltd.
"It took 15 years for the Indian IT to become worth $100 billion and now it will take only five years to go from 100 billion to 200 billion," he added. Tech Mahindra, Infosys, TCS and Wipro are his top bets in the sector.
Given the large size of the companies attained, the sector would continue to grow at a CAGR of 10-15% annually.
Industry consolidation led by mergers and acquisitions could add another dimension to growth, say experts. Social, mobile, analytics and cloud (SMAC) may remain a key driver for this growth, they say.
"I believe that the year 2014 would be much more promising and social, mobile, analytics and cloud (SMAC) is considered as a huge future opportunity with new technology and platform," said Tushar Pendharkar, Equity Strategist, Right Horizons Financial Services.
"In addition, Infosys, TCS and HCL Technologies has 'xash & equivalents' of over INR 260 billion, INR 65 billion and INR 60 billion respectively, which could be used for M&A across the globe. In that way, it would take next five years for the industry to reach the USD 200-billion mark," he added.
Shashank Khade, Director and Chief Equity Advisor, Entrust Family Office Investment Advisors, also feels that the industry consolidation led by mergers and acquisitions could add another dimension to growth.
The large IT services companies, which contributed the most to the milestone of $100 billion, succeeded in building huge scale in their organisations during this period, he added.
Given all the optimism, analysts do not rule out downside risk to the current assumption. They see the US Fed tapering, rupee appreciation, rising competition, Immigration Bill and new technology putting brakes on the growth story of the India IT sector.
Daga of Microsec Capital is of the view that some downside risks to these estimates prevail in the forms of immigration bill, tapering impact and less stable government in India, but fast growing technologies and businesses such as e-commerce, mobile applications, and wearable gadgets may help the industry perform better than expected.
Dr. Vikas Gupta, Eexecutive Vice President, Arthveda Fund Management Pvt Ltd, is of the view that India will attract more global companies outsourcing to us and the existing ones are more likely to increase their share of volumes.
"The rupee might depreciate further, which will help the IT sector to better its margins, and the pricing power of the Indian IT companies is likely to improve going forward," he added.
Attractive stock bets for long term:
Most analysts expect frontline IT companies to take the charge in growing the sector from the current levels. From the large-cap space, most analysts prefer TCS, Tech Mahidra and HCL Technologies.
Daga of Microec Capital says, taking into consideration the future growth opportunities in the industry, current performance of Indian IT players, and their respective business strengths, TCS remains their top pick in the sector, led by its strategic focus and execution on digital front.
India's IT sector seen at $200 billion in five years: Top stock bets - Economic Times
IT & ITES was one of the top performing sectors of the calendar year 2013. Currency fluctuation and marginal improvement in global economy have made the sector worth more than USD 100 billion as of today.
The year 2014 is expected to be better for the IT industry due to its diversification in analytics, mobility, cloud, social media and emerging verticals such as healthcare and medical services, said Tushar Pendharkar, Equity Strategist, Right Horizons Financial Services.
As per NASSCOM estimates, while Indian IT exports are likely to grow in a range of 13-15 per cent per annum, the domestic market is expected to rise by a modest 9-12 per cent due to election impact.
However, "over the next couple of years, the growth will remain better, in our view, due to expected recovery in the west, especially in the US, and expectation of stable government at home," said Nitin Prakash Daga, Vice President - Research at Microsec capital Ltd.
"With these factors expected to prevail, we expect the Indian IT sector to grow at a CAGR of 13.2-15.2% over the next five years," he added. Consequently, the industry size may expand to around $219-239 bn by FY2019 from $118 bn projected by NASSCOM for FY2014, says Daga.
Indian IT companies are now well recognised for delivering quality and have proved their capabilities of timely execution of projects and are best positioned to ride global recovery. The currency movement would also be a key trigger for the sector.
Despite strong appreciation seen in the rupee, the IT sector is one of the best trades and the best of IT is ahead of us, says Raamdeo Agrawal, Joint MD & Co-Founder, Motilal Oswal Financial Services Ltd.
"It took 15 years for the Indian IT to become worth $100 billion and now it will take only five years to go from 100 billion to 200 billion," he added. Tech Mahindra, Infosys, TCS and Wipro are his top bets in the sector.
Given the large size of the companies attained, the sector would continue to grow at a CAGR of 10-15% annually.
Industry consolidation led by mergers and acquisitions could add another dimension to growth, say experts. Social, mobile, analytics and cloud (SMAC) may remain a key driver for this growth, they say.
"I believe that the year 2014 would be much more promising and social, mobile, analytics and cloud (SMAC) is considered as a huge future opportunity with new technology and platform," said Tushar Pendharkar, Equity Strategist, Right Horizons Financial Services.
"In addition, Infosys, TCS and HCL Technologies has 'xash & equivalents' of over INR 260 billion, INR 65 billion and INR 60 billion respectively, which could be used for M&A across the globe. In that way, it would take next five years for the industry to reach the USD 200-billion mark," he added.
Shashank Khade, Director and Chief Equity Advisor, Entrust Family Office Investment Advisors, also feels that the industry consolidation led by mergers and acquisitions could add another dimension to growth.
The large IT services companies, which contributed the most to the milestone of $100 billion, succeeded in building huge scale in their organisations during this period, he added.
Given all the optimism, analysts do not rule out downside risk to the current assumption. They see the US Fed tapering, rupee appreciation, rising competition, Immigration Bill and new technology putting brakes on the growth story of the India IT sector.
Daga of Microsec Capital is of the view that some downside risks to these estimates prevail in the forms of immigration bill, tapering impact and less stable government in India, but fast growing technologies and businesses such as e-commerce, mobile applications, and wearable gadgets may help the industry perform better than expected.
Dr. Vikas Gupta, Eexecutive Vice President, Arthveda Fund Management Pvt Ltd, is of the view that India will attract more global companies outsourcing to us and the existing ones are more likely to increase their share of volumes.
"The rupee might depreciate further, which will help the IT sector to better its margins, and the pricing power of the Indian IT companies is likely to improve going forward," he added.
Attractive stock bets for long term:
Most analysts expect frontline IT companies to take the charge in growing the sector from the current levels. From the large-cap space, most analysts prefer TCS, Tech Mahidra and HCL Technologies.
Daga of Microec Capital says, taking into consideration the future growth opportunities in the industry, current performance of Indian IT players, and their respective business strengths, TCS remains their top pick in the sector, led by its strategic focus and execution on digital front.
India's IT sector seen at $200 billion in five years: Top stock bets - Economic Times
