Indian IT giant Tech Mahindra surprised investors this week with its biggest profit fall in over 16 years, highlighting the impact of global recessionary trends on the revenue of IT services providers.
Rising interest rates appear to have forced large businesses in the United States and Europe, from where Indian IT firms draw much of their revenue, to cut back on spending.
This tightened spending is also evident in the quarterly results of Tech Mahindra’s domestic peers, such as Infosys and HCL Tech, which also cut revenue forecasts.
Tech Mahindra’s executives did not directly blame lower spending for the shrinking revenue. However, the decrease could be attributed to telecom clients, many of whom are believed to be under financial stress due to the cut-throat competition in their sector.
Tech Mahindra’s total contract value was at US$640 million, an increase from the $300 million reported in the previous quarter.
The biggest shock came from Infosys, known as the IT bellwether in India’s IT sector, which cut its FY24 guidance to 2.5%. Happiest Minds, one of the fastest-growing IT firms in India, also lowered its FY24 growth forecast to 12% from 25%.
“Based on an assessment of market trends, we are revising our revenue growth guidance for the year to 12%,” Ashok Soota, Executive Chairman of Happiest Minds, told reporters after releasing quarterly revenue.