DOLAT CAPITAL

Indian IT Sector

India Research

Billion Dollar Dream...!!!

Sr. Analyst: Rahul Jain Tel : +9122 4096 9754 E-mail: rahul@dolatcapital.com

December 21, 2012

DOLAT CAPITAL

December 21, 2012

Int en tio na lly Le ft B lan k

2

DOLAT CAPITAL
”A journey of a thousand miles starts with a single step” - Lao-tzu, the ancient Chinese philosopher

Billion Dollar Dream
The Indian IT Services sector, estimated at USD 90bn, has predominantly focused on the global markets which generate more than 75% of revenues. The industry has spread far and wide with over four thousand players comprising of global MNCs, Indian players, Captives and small scale set ups. As is natural for any sector, the top five have consolidated to garner a significant share of the revenues ( 37%) while the top ten have taken 41% share of the total revenues. This has primarily been driven by the ability to scale and offer multiple service capability. The smaller players have been either de rated by circumstances, and hence gone down the margin curve or ended up taking bets that have gone the wrong direction. This trend over the last few years has led to a significant divergence in the size and structure of the Indian IT services sector – there are players with size of USD 2-10 bn range competing with the global players, and then we have a set of relatively smaller service providers in the revenue size of sub USD 500 mn still around. And some of these now are emerging into credible players in some of the niche segments. And we believe they have the potential to turn into billion dollar entities in the next few years. Why a Billion Dollars The accrual of a billion dollar in revenues has its own significance considering the fact that the outsourcing maturity is relatively high among the large global corporations (clients) Global 2000/Fortune 1000 companies. Hence a