MOSL: TECHNOLOGY-Elusive BFS recovery means moderation in FY18 outlook-LTI confident on growth; PSYS / TECHM on track to revive margins

​Technology: Elusive BFS recovery means moderation in FY18 outlook; LTI confident on growth; PSYS / TECHM on track to revive margins

Anticipated recovery in key areas eludes

• ​The demand environment appears to be at status quo for both the stronger and weak momentum segments. Recovery remains elusive in weaker areas, which were hoped to stabilize through the second half of the calendar year:
  
  • 1.Uptick in BFSI after 5-6 quarters of hiatus, driven by multiple expectations in the US. However, none of the talk has resulted into policy action on the ground, keeping BFS muted.
  • 2.Retail vertical - the stress is more structure in some large accounts, tying with news flows of multiple store shutdowns across firms.
• 3.The ramp-up of large deals and velocity of sales cycle in large traditional areas of work - some reluctance to such large scale offshore programs remains.
  
• Consequently, the revenue growth estimates that baked some improvement, especially in BFS-heavy portfolios, will see some downward revision. Many crucial large programs cannot remain suspended forever, which will keep hopes of mildly better FY19 alive for now.
  

Digital / Automation: Industry evolving to broader, deeper partner ecosystem

• ​Multiple companies cited the trend of increasing sizes in Digital, and the importance of contextual knowhow giving a shout to the India-origin providers.
  
• Also, the culture of partnering with the ecosystem is only gaining in relevance to define the success in Digital. The breadth and depth of such partnerships has grown multifold v/s fewer collaborations in the past. Hence, getting this right will be equally crucial as building organic capabilities.
  
• For companies such as WPRO, Automation / Productivity improvement focus has been central for a few years now. Here too, most companies are taking a technology-agnostic approach, and partnering with multiple available solutions in the market, in addition to their own internal initiatives in the area.