Impact of Covid-19 in IT Sector

Indian IT firms will face the full impact of business

disruption in the US and Europe due to the Covid 19-
induced lockdown in the quarter to June, as analysts
expect companies to report 5-10 per cent drop in
revenue due to clients cancelling or putting off
discretionary spending on technology in the three-
month period.
Sectors such as travel and transportation, oil & gas and
retail have been the most affected due to the
lockdown in the three-month period, with several
companies declaring bankruptcies due to the loss of
their business.
TCS is expected to see revenue drop by 6 per
cent, Infosys by 5 per cent, HCL Technologies 8 per
cent, Tech Mahindra by 9 per cent and Wipro by 7.5%,
brokerage firms said in their reports.
These companies will also see margins being affected
during the quarter, even as they have taken steps to
cut costs and rein in expenses.
The outbreak of Covid-19 has severely impacted the
global economy, with disrupting businesses across
diverse sectors around the world. The spread of the
virus now has led countries into lockdown, fearing the
economy of a recession. As the virus significantly
affects most established countries, its impact on India
is relatively low than others but has a larger impact on
the country’s businesses and economy.
Since the country’s nearly 55 percent of electronics
imported from China, these have now slid down to 40
percent due to the coronavirus outbreak and
subsequent lockdown. Over the last couple of decades,
the IT industry has been India’s leading sector to
economic growth. It plays an imperative role in
fulfilling the country’s several middle-class dreams of
accomplishment and aspirational careers.
However, due to coronavirus Covid-19 outbreak,
players in India’s IT services, according to industry
analysts, will see a significant slowdown in growth
during this financial year. Reports claim that top
software exporters, including Tata Consultancy
Services, Infosys, and HCL Technologies, will be
impacted most by the lessened technology spending
from clients in the US and Europe following lockdowns
across the globe.
In the time of crisis, Brokerage HDFC securities
anticipates IT sector revenue to cut down by 2-7
percent due to a delay in decision making in the next
six months while businesses assess the impact of the
virus. Customers are also expecting to reduce their IT
budgets and slow down new initiatives due to the fear
of uncertain economic situation and recession.
The pharmaceutical industry is also disrupted by the
Covid-19 outbreak because 70 percent of active
pharmaceutical ingredients are imported from China.
These active pharmaceutical ingredients are
indispensable to a large number of pharmaceutical
manufacturing companies in India.
According to the National Association of Software and
Services Companies (NASSCOM), India’s software and
services exports grew 8.1 percent to US$147 billion in
the fiscal year 2020. Moreover, Infosys and HCL
Technologies give annual forecasts, while Wipro gives
revenue guidance for a quarter. However, these firms
are yet to announce dates for their quarterly results.
Meanwhile, other IT firms in the country such as TCS
and Infosys begin the results calendar in the second
week of April.