Information Technology's trade body National Association of Software and Service Companies will revise its industry growth forecast in the first week of December. Though the industry would be able to meet the $60-billion target for 2010, the body may revise software exports growth forecast downwards by few percentage points for 2008-09 due to the US financial turmoil.
"The current financial crisis in the US has certainly impacted the domestic IT industry as a majority of the business comes from the US. However, by how much we would come to know in December after the review comes up. There will be a short-term impact," said Som Mittal, president, Nasscom. In July, Nasscom had forecast revenue growth rate in the range between 21 and 24 per cent to reach $50 billion in FY08-09.
However, the financial turmoil has led the domestic IT firms to explore new territories in Europe, Asia and West Asia thereby decreasing their dependence on the US, Mittal said.
He also said that the scope for embedded designs and manufacturing of hybrid chips is high. This has also led to a rise in merger and acquisition opportunities.
It is worrying
Against the backdrop of the US financial crisis, Nasscom may revise software exports growth forecast downwards by few percentage points for 2008-09
The US crisis is likely to have a short-term impact on Indian IT industry, the apex body says
However, the crisis has led the domestic firms to explore new territories in Europe, Asia and West Asia
The scope for embedded designs and manufacturing of hybrid chips is high
The American government's $700-billion bailout fund is likely to help markets to recover
In third and fourth quarters, we will see a large number of acquisitions as the aspirations of the companies are rising and it is cheaper to buy companies as valuations are lower now," Mittal said on the sidelines of the EmergeOut Conclave 2008.
Small and medium enterprises are likely to see more merger and acquisition activity as their growth is faster at about 43 per cent than the industry average of 30 per cent.
Analysts also concur with Mittal's statement and said that the low sentiment in the overall market will remain only for third quarter. Diptarup Chakraborti, principal research analyst, Gartner, said that there can be restructuring in companies such as HP-EDS and after some time, supply of talent may exceed demand. Indian firms are likely to buy small companies overseas rather than buying domestic companies.
