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India Gaurav LahotiSector Review Information
Technology (IT)
(91) [email protected]
09 May 2011
Please see important notice on last page Page 1 of 5
Demand driver
Sector Overview
Indias IT sector is expected to cross $100 billion mark in FY
2012-2013. But,with rise in revenue it is expected that growth rate
will decline in current year.
Indias domestic market for It Industry shows growing trend of
22.4% infinancial year 2010.
Export market CAGR for IT & ITES in 20072012 is stands at
15.4%. Due toeconomical crisis in global market in year 2010 growth
trend dip in year.
IT sector employed 2.5 million people directly & 8.1 million
people indirectly inIndia.
Indias IT industrys revenue is generated by sell of products out
of India i.e.export
Export market like US & Europe plays very important role as
they are big hubfor Indian Export.
IT sector in recent past in 2011 faces decline in growth rate
due to US &European crisis as these markets are demand dr5ivers
for IT Industry.
Major players in IT industry easily raise capital from public
borrowing & sharecapital.
Interest rate of Banking firm also affect adversely to IT
Industry as workingcapital of IT industry such as TCS, Infosys are
financed by Banking firms.
IT industry in past decade showing positive growth rate year
over year.
Figure 1
Sharply surplusproduction
Market Size of IT Sector -Domestic
Export growth
Employment at peak
Factors of Production
Positive revenue trends iIT Industr
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Major Players
Production Analysis of ITIndustry
GDP contribution of IT sector rose to 6% approximately
Source: Information Technology Annual Report
Production is rising year over year but growth rate of
production is decline over
past two years. Amount below are in 1000 USD.
Top 5 players in IT industries are:
Rank Company Name Market Share
1 Tata Consultancy Services 8.5%
2 Infosys Technologies Ltd. 7.9%
3 Wipro Technologies Ltd. 6.9%
4 Cognizant 5.2%
5 HCL Tech 4.0%
Source: Aranca Research
GDP contribution of ITsector
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Comparison of two bigplayers of market
Inventories of ITdepartment
Foriegn Investment in ITSector
Measures of Financial
performanceTCS Infosys
Market Cap 241,029 (cr.) 132,755 (cr.)
P/E 23.76 17.59
EV/EBITDA 16.02 11.71
ROE (%) 49.5 31.2
ROCE (%) 59.3 42.7
Inventories are falling as shown in following graph. Grey scales
shows US economy
fall/ crisis
Source: FRED
100% of Foreign Direct investment (FDI) is allowed in Technology
Sector
SectorFDI Inflow
(millions of Rs.)% of total inflow
Services 787,420 22.39
Computer Software &Hardware
391,109 11.12
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Government Tax policymay impact future growth
of IT sector
SWOT Analysis
Geographical distributionof IT sector India
Government policies towards taxes of raising 2% service tax this
year may affect
future of IT sector. But, in IT sector there is no big
government undertaking to
compete with Private Sector entities.
Bangalore the Silicon Valley of India is currently leading the
Information technology
industries in India.
Source: Tribiz
Strength:
1) Growing Industry with highprofitability
2) Maximum Export Business
Weakness :
1) Depends on US and Europeancountries for exports
2) Non availability of skilled workers
Opportunities:
1) Asia is considered to be thesecond largest IT market due
to
adoption of Technology &
outsourcing of Technologies
2) Demand is much more higherthan supply
Threat:
1) Duplicability of Product & cheaperProduct
2) Growing Chinese market3) BRIC countries contribution is
growing
City
Total inventory - office
space
(In million square ft.)
Total Inventory - IT-ITES
space
(In million square ft.)
Bangalore 50.35 40.28
Chennai 45.76 36.61
Kolkata 19.42 15.54
Mumbai 38.80 13.52
Pune 28.27 17.45
Delhi NCR 15.99 11.99
Hyderabad 14.48 11.54
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Growth
Drivers
Global
Demand
Talented
Workers
Infrastru
cture
Policy
SupportDomestic
Growth
Growth Drivers
Merger & Acquisition in ITIndustry in recent Past
Future of Indian IT sector
Tech Mahindra bids to acquire Satyam for Rs.1,757 cr. for its
31% shares. Tech
Mahindra paid Rs. 58 for each share of Satyam.
In future Indian IT sector will flourish due to increasing
demand fromoutside market and it is estimated that growth rate for
IT industry is 16%for this year. Indian IT sector is supposed to
touch Landmark of 225 BillionUSD till 2020 and employ over 6
million people directly till 2020. Withcontinuous growth of FDI
inflow IT industry will become top contributor in
Indias GDP.
Take Over
