ArrowArtboardCreated with Sketch.Title ChevronTitle ChevronEye IconIcon FacebookIcon LinkedinIcon Mail ContactPath LayerIcon MailPositive ArrowIcon PrintSite TitleTitle ChevronIcon Twitter
Nikkei Markets

Accenture earnings raise hopes for Indian software exporters

Outsourcing group's revised outlook 'encouraging' for sector amid virus concerns

Outsourcing services represent a major growth driver for Indian software exporters.   © Reuters

MUMBAI (NewsRise) -- Accenture's second-quarter earnings augur well for Indian software exporters as strong demand for outsourcing services outweighs concerns over the coronavirus pandemic that has hammered major Western markets.

On Thursday, Accenture reported a 9.8% increase in its second-quarter profit, but slashed its revenue growth forecast for this year to 3%-6%, from 6%-8%, citing the coronavirus pandemic that is raging across the world. The company reported a 22% jump in new order bookings.

The lion's share of the growth for Accenture came from outsourcing services, which typically entails managing the technology infrastructure of clients and running their back offices -- a major growth driver for Indian software exporters.

"Accenture's February quarter performance is perhaps the first quantitative data which came out post the start of coronavirus disruption in Asia-Pacific in late December," brokerage Motilal Oswal Group noted in a report on Friday. Analysis of Accenture's geographical growth rates, employee utilization rate and new outsourcing deal wins suggest it has suffered "no damaging disruption" so far due to the virus outbreak, the brokerage said.

The coronavirus pandemic, which began late last year in China, has wreaked havoc across continents as businesses have been forced to close and countries resorted to emergency lockdowns to contain the spread. The virus has so far infected about 245,000 people and killed more than 10,000.

Accenture's revised outlook and commentary around demand and supply were "encouraging," especially in the context of the alarming increase in virus-infected cases in major markets like the U.S., the U.K., and Europe, Motilal Oswal said. "This should partly calm the nerves of Indian information technology investors about the potential disruption to operations, business continuity, and new deal wins."

More than 13,000 people in the U.S. have tested positive with the illness, while more than 200 people have died. In Europe, Italy has become the new epicenter of the virus, with 3,405 people dead from the infection -- more than the figure in China, where more than 3,200 people have died.

The outbreak has sent global financial markets into a dizzying spiral, with the U.S. Federal Reserve forced to cut its key interest rate by 100 basis points on Sunday -- its second emergency reduction in less than two weeks.

Shares of top Indian software exporters Tata Consultancy Services, Infosys and Wipro have lost 17%, 20% and 27%, respectively, in Mumbai trading since the beginning of this year. The benchmark BSE Sensex is down more than 27% so far this year.

On Friday, TCS shares rose 9.9%, while those of Infosys and Wipro gained 7.3% and 10.1%, respectively. The benchmark BSE Sensex index gained 5.8%.

"Overall, Accenture's result read-through is positive for other IT companies on providing framework, and lending comfort on business continuity," Kotak Institutional Equities said in a report. On the negative side, a steep correction in the near-term growth rate is to be expected, the brokerage added.

--Dhanya Ann Thoppil

Sponsored Content

About Sponsored Content This content was commissioned by Nikkei's Global Business Bureau.

You have {{numberArticlesLeft}} free article{{numberArticlesLeft-plural}} left this monthThis is your last free article this month

Stay ahead with our exclusives on Asia;
the most dynamic market in the world.

Stay ahead with our exclusives on Asia

Get trusted insights from experts within Asia itself.

Get trusted insights from experts
within Asia itself.

Try 1 month for $0.99

You have {{numberArticlesLeft}} free article{{numberArticlesLeft-plural}} left this month

This is your last free article this month

Stay ahead with our exclusives on Asia; the most
dynamic market in the world
.

Get trusted insights from experts
within Asia itself.

Try 3 months for $9

Offer ends July 31st

Your trial period has expired

You need a subscription to...

  • Read all stories with unlimited access
  • Use our mobile and tablet apps
See all offers and subscribe

Your full access to the Nikkei Asian Review has expired

You need a subscription to:

  • Read all stories with unlimited access
  • Use our mobile and tablet apps
See all offers
NAR on print phone, device, and tablet media