Sector Update | Technology
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So far, so good
Deal wins in 1HCY19 v/s 1HCY18 suggest healthy, not cautious macros
Amid claims of softening macros and multiple uncertainties, we compared the
deal activity in 1HCY19 to that of 1HCY18, on the basis of key data points —
aggregate deal TCVs as reported by ISG-One, and 1HCY19 deal TCVs at TCS, INFO
ISG had anticipated softer deal activity amid the on-going concerns around trade
wars, Brexit and the recessionary fears around a few developed economies.
However, deal activity has been surprisingly strong despite the macro
headwinds. Pipeline is strong in ADM and IMS. ISG-One’s survey of most
providers indicates positive growth patterns at the year-end.
While order bookings for Accenture were on the softer side, the company
reiterated its lumpy nature on a quarterly basis, brushing off any demand
concerns. It expects to play catch-up given the strong pipeline.
For INFO and TCS, deals TCV reflected a business-as-usual scenario in the June
quarter. While the USD2.7b TCV figure at INFO was a historical high, it was
steady growth, once adjusted for the inorganic contribution from Stater NV.
(TCS started sharing this data from 2QCY18. For 1QCY18, we have approximated
the TCV at USD6b, on the basis of Transamerica (USD2.5b), Prudential and
Marks & Spencer – assuming these to be 60-70% of the total deals won).
Execution on deals won should take care of the remainder of the calendar year.
All entities mentioned above have cited a very healthy pipeline, suggesting that
deal activity is likely to remain strong for the remainder of CY19. This, in turn,
should bode positively for revenue growth over the next one year,
notwithstanding any macro shocks.
Infosys deal wins
TCV ( USD B)
TCS deal wins
TCV (USD B)
**1QCY18 deals taken as USD6b (large wins)
Source: Company, MOFSL
– Research analyst
(Ashish.Chopra@MotilalOswal.com); +91 22 6129 1530
Research Analyst: Anmol Garg
(Anmol.Garg@MotilalOswal.com); +91 22 7193 4271 /
Motilal Oswal research is available on www.motilaloswal.com/Institutional-Equities, Bloomberg, Thomson Reuters, Factset and S&P Capital.
16 July 2019
advised to refer through important disclosures made at the last page of the Research Report.