News & Analysis

Accenture’s Revenue Guidance Sets off Alarm Bells 

On another front, the foreign portfolio investors are reducing their exposure to the Indian IT industry, on fears that a US recession will impact it adversely

Accenture gave a below-market estimate revenue guidance of between 8% to 11%, which is being interpreted by the markets as an indicator of how Indian IT companies may run into headwinds of recession in the US and Europe that could potentially shave off the growth momentum they’ve experienced post the lockdowns. 

The company expects revenues to grow between 8-11% in local currency as against the 15% spike in dollar terms and 22.4% increase in local currency terms achieved for the quarter ended August 31, 2022. Revenues touched $15.4 billion with operating margins expanding by a whole ten basis points to 14.7% during the period.


Are the recession clouds looming?

Analysts believe that the lower than expected revenue guidance for the full financial year could be a major concern that indicates a slowdown in the West. This could translate into bad news for the Indian IT companies that rely heavily on offshored work. 

In fact, there’s further indication of the challenges ahead as foreign portfolio investors shaved off their exposure to the Indian IT industry. The weight of the IT sector in FPI equity portfolio dropped below the pre-Covid levels of 10.% during the first 15 days of September, according to data provided by the NSDL. Of the total FPI outflow of $18 billion thus far in 2022, over $10 billion was through the sale of IT stocks. 

Indian IT companies earn more than half their revenues from the BFSI and manufacturing business customers in the US and Europe, which is the reason for the direct correlation between the economic growth in these countries and its impact on IT revenues. 


There’s a silver lining in the gloom

However, amidst all this gloomy weather, there’s that silver lining too. IT services companies are now tapping into alumni networks and other sources to provide full-time equivalent opportunities to gig workers. Which obviously means that there’s enough and more work coming India’s way that is leading to a talent shortage in the business. 

A report by IT market intelligence company UnearthInsight says that between April 2020 and September 2022, IT firms hired more than 1.2 lakh people, which is almost like 80% of the total tech service workers earlier employed on a gig-based model. Over the two quarters ending December and March of FY22, 70,000 freelancers converted to full-time status while in the quarters ending June and September, this number stood at 30,000. 

However, gig workers as a proportion of overall employment remained stagnant at between 0.02 and 0.03% for top-tier companies while for the rest it was around 0.01 to 0.05% of the workforce, says the report adding that these figures remained flat due to newer candidates joining the gig workforce in recent times. 

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