CFO Bridge Insights November 2023

Charting the Course: Revenue Segments

FY23 Vertical wise revenue segment mix % as per annual report

The data of the Top 6 Indian IT players is gathered from their Annual report and/or their Investor presentations. Where needed the same has been logically grouped, there can be minor overlaps so kindly read this report keeping this in mind. Where companies which have not shown data in specific vertical segments “data ”, would have classified them as part of the “Others” category or would have clubbed them into other categories and may not have specifically called out.

It may be noted that 29% of the Aggregate revenue mix of the Top 6 Indian IT players is from BFSI segment followed by Retail , CPG, Travel & Logistics segment at 14%.

Barring Tech M which has 40% of its revenue from Communication & Media vertical, rest of the 5 IT players have predominant revenue mix contributed from BFSI segment only.

Infosys, HCL and Wipro have about 10-12% coming from Energy, Utilities and Public services vertical, while other companies have not shown the break up which means they are classified as others or clubbed under other verticals or manufacturing.

Learning for the Mid and SME segment companies, do classify the current customer base into various verticals to know the vertical segmentation of Revenue and Profitability. It is important to assess there is no concentration risk and a risk mitigation should be put in place, just in case.

We can see Tech M with high concentration risk / opportunity at 40% on communication & media and similarly, LTIM on BFSI at 37%. Similarly if there are any emerging or growing segments, tapping on those opportunities is also important. One should not miss the same.

Hope the above data table gives some food for thought for the Mid and SME segment companies to introspect and action.

FY23 Geography wise revenue segment mix % as per annual report

The top 6 Indian IT player’s revenue composition is 58% from the Americas, Europe 27% and balance 15% is from the rest of the world (ROW).

What is witnessed is that Tech M is having a relatively higher revenue mix % from ROW+ India compared to other players. This is an indication of spreading of the risk, keeping dependency on America's lower.

LTIM( L&T Mind Tree), at 72% revenue coming from Americas indicates a significant dependency on Americas. So any recessionary trend in the US can have an impact on their business.

Wipro and LTIM have not given their break-up of India revenue mix so it is assumed it would be part of ROW revenue mix %. But by observing the India revenue mix of other companies , both Tech M and TCS have about 6% of revenue from India and Infosys and HCL have ~ 3 to 4% from India. With India starting to script a very big story to become 3rd largest global economy in a couple of years to come, there is a clear need for these companies to start their focus on India as well.

The IT industry has been through a muted/slow growth phase currently but early signs of IT spending revival is being indicated and surely this would be opening doors for the new emerging technologies in the near future. Also there are indications of smaller ticket sized deals and there are mid sized players competing in the niche spaces too.

Hence the IT companies in the mid and SME segment need to first assess the revenue mix of their portfolio, see if they can avoid over dependency on Americas or any other specific geography and explore other geographies too as a risk mitigation measure. It is important to avoid concentration risk, be proactive and plan to avoid the risk and not end up fire-fighting after a crisis. This concentration risk can be at customer level too. So be watchful of the same too.