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Tuesday, September 27, 2022

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India Technology – Macro Concerns To Limit Ordering Activity: ICICI Securities

BQ Prime’s special research section collates quality and in-depth equity and economy research reports from across India’s top brokerages, asset managers and research agencies. These reports offer BQ Prime’s subscribers an opportunity to expand their understanding of companies, sectors and the economy.

Global managed services (IT services) annual contract value in Q2 CY22 was at $8.8 billion (up 1.1% QoQ, 2.3% YoY), but YoY growth rate considerably moderated during the quarter.

Managed services ACV in America dipped QoQ to $4.1 billion (down 8.9% QoQ, flat YoY) while Europe, the Middle East and Africa ACV was healthy at $3.9 billion (up 2.6% QoQ, 11.4% YoY).

Deal activity declined 6.5% QoQ and rose 9% YoY. Q2 saw nine mega deal wins, but majority were restructured contracts.

ISG has reduced its global managed services ACV growth forecast to 3.5% YoY from earlier 5.1% for CY22E. ACV grew 8% YoY in H1 CY22 implying down 1% YoY growth in ACV during H2 CY22.

This is in line with our expectations of growth normalising ahead. ISG attributes its reduced forecast to:

  1. sharp decline in legacy infrastructure services,

  2. high base of last year,

  3. 150-200 basis points cross-currency headwinds, and

  4. macro uncertainties.

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