1 week Ago
The US tariffs don't apply to services, but they could still hurt India's software services exporters due to their impact on key client sectors such as manufacturing and retail. This could reduce the cumulative revenue of India's outsourcing companies by up to 3% in the current fiscal ending March 2026, industry experts told ET. Tariffs will impact most in two verticals for IT and ER&D (engineering, research & development) service providers - the manufacturing and consumer industries, said Pareekh Jain, CEO of homegrown data insights platform EIIRTrend.
These two industries are around 35-40% of revenue for Indian IT service providers. Jain, an outsourcing expert, expects the reduction in discretionary spend in these industries to impact 2-3% of revenue for Indian IT and ER&D service providers. Analysts have also started cutting growth projections for the $280-billion sector, expecting supply chain disruptions to hit the key sectors denting Indian IT companies' deals and revenue.
The steep tariffs announced by the US last week have added to global uncertainty and lowered GDP growth expectation for developed economies, which are key revenue markets for the technology outsourcing industry. Uncertainty at the beginning of the year would lead to deferral of decisions and impact growth in the crucial and seasonally strong quarter of June, Kotak Institutional Equities said in an IT services report released on Friday. This new reality would mean that FY2026E could now end up being worse than FY2025 for many of the companies.
120073119 We once again cut revenue and EPS (earning per share) estimates (after cuts in March 2025) for our coverage universe, taking in the reciprocal tariffs imposed by the US against many countries, the report added. Analysts now forecast the tariff-led elevated level of uncertainty to reflect on the commentary and guidance by the companies. As on FY24, manufacturing and retail contributed cumulatively around 14% and 9%, respectively, annually to the revenue for top 5-6 IT majors like TCS, Infosys, HCLTech, Wipro and including globally headquartered Accenture and Cognizant.
A Nuvama (formerly Edelweiss) institutional equities report said, Taking the current macro uncertainty into account, we are cutting estimates (0-7% - factoring in a potential delay in resumption of discretionary spends and/or weak US GDP growth rate hurting technology spends. The Kotak report said retail, logistics and manufacturing are likely to be significantly impacted due to the higher cost structure and disruption in global supply chains. HCLTech, Tech Mahindra, LTIMindtree and Infosys have higher exposure to retail and manufacturing, while Coforge, Persistent and Mphasis have lower exposure, it highlighted.
.
