Mid-size IT companies invest in digital initiatives as clients take to virtual platforms

Pune: Mid-size information technology companies in the country are investing in digital initiatives as companies take their businesses to virtual platforms and expect faster growth in the year ahead with more sectors set to recover from the lockdown slump.Most firms, including Mindtree, Zensar, Persistent Systems, LTI and Hexaware, have seen an improvement in their free-cash flows and margins in the quarter ended June, mainly on account of strict cost-cutting initiatives, industry experts said. “The companies aren’t facing any client pricing issues in spite of what is going on and all of them have improved margins during this quarter,” said Aniket Pande, lead analyst - IT and telecom at broking house Prabhudas Lilladher.He expects most sectors to start recovering in the ongoing quarter though some like travel and manufacturing might take longer. Even within these sectors, companies remain optimistic, Pande said.Lockdowns and restrictions had virtually brought economic activities across sectors to a standstill in the June quarter. IT services are among the least impacted as companies across industries implemented work from home and started taking their businesses to the cloud. “We have not lost any clients in travel,” said Debashis Chatterjee, CEO of Mindtree. “There has been a decline and ramp down. And we’re confident that as they bounce back, they will need our services.”Mindtree closed the first quarter with an order book of $391 million. Chatterjee said it would focus on mining existing accounts going forward. Zensar, which reported an improvement in its core business EBITDA, said the June quarter was strong operationally. “We’re seeing very good traction on the cloud business and virtual systems of engagement,” company CEO Sandeep Kishore said. “Clients are looking for a cost takeout, and all of this will drive growth,” he told ET. Persistent Systems said it benefited from a vendor consolidation drive by one of its largest clients. “BFSI continues to be a standout, as does cloud,” said Sandeep Kalra, president - technology services unit at Persistent Systems.77323932Even companies with strong exposure to travel or manufacturing such as NIIT Technologies and LTI, the technology arm of Larsen & Toubro, expect growth in the full year.NIIT Technologies, which bore the brunt of a strong exposure to the travel and airline business in the June quarter, has predicted mid-single digit growth for FY21.

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