The continuing recession in many western countries and economic stagnation is having its impact on the Indian information technology industry, with companies reporting lower top-line growth and a squeeze on billing rates.
Infosys Ltd, the country's second-largest software services exporter, reported a 3.7-per cent fall in pricing for the June quarter, while TCS Ltd, the number one exporter, announced a one per cent fall in prices.
According to B G Srinivas, Infosys' head, financial services, Infosys, said the company was under pressure to offer discounts to clients in the financial sector. ''When the overall budgets are under pressure, there is definitely a move to get more for less, and in that context, of course, there's competitive pressure as well,'' he noted.
In a report, Kotak Institutional Equities analyst Kawaljeet Saluja wrote that the economic slowdown and lack of consolidation in the sector would manifest in reduced pricing power and profitability for the top players.
''This mismatch between incremental growth available and higher growth aspiration for existing players is leading to aggressive pricing behaviour,'' said Saluja. ''Our channel checks indicate aggressive pricing by a tier-1 player. Infosys' pricing decline is also worrying.''
Infosys, which on Thursday cut its guidance for the year, said it expects prices to decline about three to four per cent in the current fiscal. The Bangalore-based IT major expects revenues to grow by about five per cent to $7.34 billion. This is sharply down from the April guidance, when it had forecast a growth of eight to 10 per cent for the fiscal.