Stock market crash: TCS sheds $21 billion in market capitalisation, Infosys $7 billion and Wipro around $3 billion.
Top three IT services firms of the country lost a combined market capitalisation (m-cap) of around $31 billion in the past fortnight as coronavirus continued to roil the stock market.
Given the global spread of the virus, the fall in m-cap is not limited to India as all global IT services majors, including IBM, Accenture and DXC Technology have also witnessed fall in their market capitalisation.
From March 2 until Tuesday (March 17), m-cap of India’s largest IT services player Tata Consultancy Services (TCS) dropped by Rs 1.45 trillion (around $21 billion) as investors sold their positions in anticipation of demand slowdown.
Similarly, country’s second-largest IT firm Infosys saw its m-cap drop by around Rs 70,000 crore (around $7 billion) in the past fortnight to touch Rs 2.36 trillion.
In case of Wipro, m-cap fell by around Rs 26,000 crore (around $3.7 billion) to touch Rs 98,902 crore on Tuesday.
Globally, the phenomenon is not different. DXC Technology’s m-cap fell to around $3 billion.
Though the IT services company, which has been spun off from Hewlett Packard’s enterprise service business, has seen fall in its m-cap last year, has accelerated in the past three months.
DXC Technology, which has an annual revenue of $21 billion and is the fourth-largest IT services firm globally, saw its m-cap falling to one fourth of what it used to be in January owing to market meltdown.
“With the global spread of coronavirus, the IT industry, which is projected to grow at 5 per cent this year, can also see negative growth.
"Now, the industry is likely to grow in -5 to +5 range. This has definitely spooked the investors,” said Pareekh Jain, an IT outsourcing advisor and founder of Pareekh Consulting.
According to global research firm Gartner, global spend on IT is likely to grow at 3.7 per cent in 2020.
However, with major countries shutting down establishment to contain the virus, demand slowdown has now become a reality.
“Both oil & gas and travel & hospitality contribute 40 per cent of IT spend. As these sectors are facing major growth headwinds now, recovery in m-cap seems challenging,” said Jain of Pareekh Consulting.
In a note, global consulting firm Everest Group said the situation was likely to continue until June 2020.
“We believe this situation is going to disrupt one quarter of demand-related revenue growth (quarter ending June 2020) with some tail beyond,” said Peter Bendor-Samuel, founder and chief executive officer of outsourcing advisory firm Everest Group.
With such demand slowdown, IT firms across the board will face severe pricing pressure in the current year, even if the outbreak was contained, he added.
IT firms have been witnessing delay in wining large deals.
“If both the demand and supply side situations improve in the coming quarters, m-cap will rebound. All depends on the containment of the virus,” Jain added.