Indian IT: Investments on track - Views on News from Equitymaster

Helping You Build Wealth With Honest Research
Since 1996. Try Now

  • MyStocks


Login Failure
(Please do not use this option on a public machine)
  Sign Up | Forgot Password?  

Indian IT: Investments on track

Dec 23, 2008

BSE-IT index is amongst the worst performing indices this year. The index is down almost 49% since the beginning of the year as IT stocks have been beaten down severely. There has been no dearth of bad news for the sector over the past few months. From extreme currency volatility to impact on business due to the financial crisis in the US and European regions, these firms have seen it all. Considering the grim situation, one might conclude that capital investments by IT companies are also on a slippery ground as the growth outlook looks bleak. However, if one were to go by the projects that some of these companies are working on currently, situation seems unlikely to remain grim long term into the future.

As per the CMIE (Centre for Monitoring Indian Economy) capex survey, about 300 projects with total investment outlay of roughly Rs 175 bn were outstanding in the Indian IT sector at the end of September 2008. Out of these 300 projects, about 165 odd projects were under construction. There are two major under construction projects which are being executed at investments of more than Rs 10 bn. These two mega projects are –Nagpur computer software project of HCL Technologies and Jaipur software park cum residential project of Infosys.

Furthermore, in the backdrop of withdrawal of the tax incentive under the Software Technology Park in India (STPI) scheme after March 2010, IT industry is significantly investing in SEZs (special economic zones). As per the CMIE, about 600 software parks (IT/ITES SEZ) with investment outlay of Rs 1,260 bn were outstanding at the end of September 2008. Following is the table which elucidates the SEZ investment plan of Indian IT majors. Investments in SEZ

Investments in SEZs
Company No. of projects Investment (Rs bn)
TCS 20 52
Wipro 25 32
Infosys 18 67
Satyam 14 3
HCL Tech. 9 25
Source: CMIE

These investments would add on significant capabilities to the industry by providing substantial seating capacities for IT professionals. These major growth plans and capability building initiatives indicate that Indian IT firms are poised to grow in the future. Though there are short terms hurdles which can pose serious challenge to these companies, the business proposition of offshore outsourcing remains attractive from a long term perspective, and so is the investment proposition in these companies.

To Read the Full Story, Subscribe or Sign In
To Read the Full Story, Subscribe or Sign In

Covid-19 Proof
Multibagger Stocks

Covid19 Proof Multibaggers
Get this special report, authored by Equitymaster's top analysts now!
We will never sell or rent your email id.
Please read our Terms


Aug 7, 2020 (Close)


  • Track your investment in INFOSYS with Equitymaster's Portfolio Tracker. Set live price alerts, get research alerts and more. Get access now...
  • Add To MyStocks