Indian IT service companies are set to announce the sharp revenue drop results for the COVID-19 cases hit quarter. This quarter has been unprecedented for companies who managed to run their operations by working from home. It is expected that companies will face a marginal decline in their revenues for the past quarter. Currency depreciation and other cost-cutting implemented by the companies are likely to help.
However, it is expected that the next quarter ending September 20 will recover and stabilize the business.
According to a report released by Emkay Global Financial Services, tier-I IT service companies may see a sharp revenue drop by 4-6 percent quarter on quarter (QoQ) basis in the US dollar. Tier-II IT service companies are also expected to fall by 4.5-8.1 percent in their revenue in the June quarter.
The report further says in the next quarter companies could face pressure on pricing as clients may ask for a few work from home(WFH) arrangements and the present situation could lead to an increase in signs of offshore deliveries.
India went into a three-week lockdown on March 25, but it was extended by 19 more days until May 3. This continued further until the end of May. Companies shut their offices in some cities indefinitely while in some places the state government’s declared the closing till July.
The COVID-19 lockdown has disrupted the way IT companies operate, and more than 85 percent of the workforce had to work from home. IT companies had to restructure their whole organization’s working patterns.
Companies now believe at least 20-30 percent of IT employees will continue to work from home even after the lockdown is lifted and after the situation returns to normalcy. Many companies held job offers and went for pay cuts to continue operations.
“WFH is working extremely well. With the kind of efficiencies that we have started delivering on WFH, there will be a significant impact in the longer term, Murugesh told PTI, stating that in future we will see a higher percentage of people working from home than pre-COVID days.
A recent report by FICCI suggests that most Indian startups are facing cash problems to continue operations. Companies who are running operations left with less cash. Start-ups including unicorns such as Zomato, Udaan, Swiggy, Ola, Sharechat have announced salary cuts and laid off employees to increase their capital.
Travel, transportation, oil & gas, and retail sectors are worst affected due to lockdown. Several companies declared bankruptcies due to the loss caused by three months-long lockdown.
Some sectors like the banking and financial services industry (BFSI), healthcare, non-discretionary retail such as grocery and hi-tech verticals, are expected to be more resilient and demand will rise swiftly.