Posts Tagged ‘TCS’

Mixed bag seen for IT services firms

April 2nd, 2014

The performance of the Indian information technology (IT) services sector during January-March 2014, the financial year’s fourth quarter (Q4), is likely to be a mixed bag.Outsourcing34

Most large companies are expected to show a 2-3.5 per cent quarter-on-quarter (QoQ) growth in revenue, amid appreciation of the rupee, seasonal weakness and company-specific issues.

Tata Consultancy Services (TCS) is likely to continue being the top performer. Infosys, the second largest, is likely to show a marginal decline or tepid growth. Wipro’s performance is expected to converge with those of peers.

“The results are likely to be mixed, with seasonal softness (slower decision making on ramp-up of new projects at the start of a new year),” brokerage firm IDFC Institutional Securities said in a note. “We expect the commentary to be positive, on the back of a healthier demand environment for IT outsourcing.”

The brokerage company estimates sequential revenue growth of the top five IT firms to be in 2.5-3.5 per cent, barring Infosys, which it sees posting a tepid 0.3 per cent rise.

On similar lines, Religare Institutional Research expects most IT companies to have revenue growth of two to three per cent, with Infosys posting a 0.3 per cent sequential decline.

The expectations from Infosys have dipped after the company’s management said last month that weakness in client spending continued through the quarter. It also said it saw “unanticipated project ramp-downs and cancellations” in Q4, and faced “challenges in skill mismatches”, which might lead to meeting only the lower end of its annual revenue growth forecast. For FY14, the Bangalore-based company had given an expectation of 11.5-12 per cent growth here.

Additionally, Infosys has seen a slew of senior-level exits over the past six months, which some analysts believe is harming the relationships with clients.

On margins, analysts do not expect much sequential movement for most IT services companies, due to limited currency movement. However, some companies could take a hit due to salary increments. Analysts estimate Infosys would forecast a seven to nine per cent revenue growth for FY15.

“Ebit (earnings before interest and tax) margins are likely to remain stable,” Anand Rathi Shares and Stock Brokers said in a pre-earnings note. “The average currency realised rate for Q4 is going to be very similar to that of Q3, giving room for companies to maintain their margins at the same levels as last quarter. Also, in the absence of other headwinds during the quarter, barring Tech Mahindra (which will book wage rises during the quarter), we expect companies to maintain their margins at Q3 levels.”

Investors will remain watchful of companies’ outlook for FY15, as there was mixed commentary over recent months. While some of the large entities had a bullish demand environment, many others have said decision making by clients was still slow. Additionally, comments about currency management will be key, after the rupee recently reversed direction.

“We expect management commentaries to reflect cautious optimism on the return of IT spend in the US, increasing adoption of outsourcing in Europe and overall pick-up in the large deal pipeline,” said IDFC Institutional Securities.


IBM’s loss in Bharti IT outsourcing deal a gain for TCS, Tech Mahindra

April 1st, 2014

In what could be one of the biggest blows for Big Blue, telecom services player Bharti-Airtel has restructured its contract with IBM, giving away work to Indian information technology (IT) services entities, Tata Consultancy Services (TCS) and Tech Mahindra.Outsourcing31

The restructuring has also meant IBM’s share in the $2-billion landmark IT outsourcing deal would come down significantly. IBM is likely to get about $500 million worth of outsourcing contracts from Airtel, after the renewed contract that was signed last week, said sources in the know. An announcement is likely within the next couple of days.

According to the earlier contract, IBM’s share of revenue was $250-300 million a year. After the renegotiation, the size has come down to $100-$125 million a year. The tenure of the deal has also been brought down to five years, instead of the earlier 10 years.

A Bharti-Airtel spokesperson declined comments on the issue. And an email sent to IBM India did not elicit a response.

“The re-negotiation has been going on for a long time now. The idea is to carve out a smaller portion of the deal for IBM and also get on board other vendors, based on capabilities and niche speciality in certain technology. IBM will not go away completely from the contract. They have been managing this for long,” said a source close to the deal discussion.

The contract size of TCS and Tech Mahindra could not be confirmed. An email sent to TCS came back with the reply: “We do not comment on market speculation.” An email sent to Tech Mahindra did not elicit any response.

Sources said the fresh deal would not mean the total size of the contract would increase. “Bharti is looking for a medium-term outcome and in a few years, they may also ease out IBM completely. The strategic change is that they have chosen two other vendors, which means Bharti wants cost efficiency,” said Alok Shende, founder director and principal analyst, Acsentius Consulting.

In the renewed contract, the key areas of work for IBM would be data services and increasing cost efficiency.

The IBM-Bharti deal was a landmark deal in the telecom space when signed in 2004. Though a total outsourcing contract, it was also based on revenue sharing. The deal size was $750 million. It kept going up, as Bharti-Airtel’s customers grew. In 2004, when the first contract between IBM and Airtel was signed, Airtel had four million subscribers, and now, Airtel has more than 200 million users.

Though there have been reports that the IBM deal was getting reduced due to some ‘violation of business-process guidelines’, analysts feel that should not be the sole reason for the overhaul. “Telecom players are going through a tough time. They are under tremendous pressure. This is more of an innovation call where Bharti wants better cost management. Besides, if there are players who are ready to give a better pricing, then why would Bharti hold on,” said an analyst on condition of anonymity.

From a deal perspective, Bharti Airtel is following a trend that is being witnessed globally, where large deals are being broken into smaller sizes, as companies prefer to work with more than one vendor. Not only do companies manage to get a good pricing advantage, but also access to niche technology firms.

For IBM though, the deal being broken is bad news. For Big Blue, the Bharti contract was a showcase deal. Not only was it a landmark deal in terms of the size, but was also the first IT outsourcing deal from the telecom sector in India.

After this, IBM also signed a contract with Idea Cellular worth $800-900 million, which comes up for renewal in 2019-20, and with Vodafone, which is worth $1 billion.


Tata Consultancy Services set to replace Genpact as top BPO

January 30th, 2014

The BPO unit of Tata Consultancy ServicesBSE 0.38 % (TCS) is set to take the No. 1 slot in the business category in India, replacing long-time leader Genpact. The change in BPO market ranking could happen either in the just-concluded December quarter or the ongoing January-March quarter.

TCS has been fast narrowing the BPO revenue differential between the two companies, and there was just a $3.8-million gap between the two in the September quarter. In the December quarter, TCS’s BPO revenues rose 13.8%, to $416 million, compared to the year-ago period. Genpact is due to announce its results for the quarter on February 6. It would be able to hold on to its lead if it has a year-on-year growth of 6.7% in its BPO business. In the September quarter, that business grew by just just 6.86%, compared to TCS’s 10.45%.

Any which way, Genpact looks set to lose its leadership by the end of the ongoing quarter, given TCS’s significantly faster growth. Genpact was founded in 1997 as a business unit within General Electric (GE), with most of its workforce in India. It was spun off from GE in 2005 and went public on the NYSE in 2007.

In the IT space, the TCS juggernaut has left all Indian rivals way behind, and with customers increasingly preferring vendors who can offer both IT and BPO in an integrated way, TCS’s BPO division has benefited immensely.

Generally, BPO units of top-tier IT companies have grown faster than revenues of pure-play BPO firms like Genpact, EXL and WNS. In November, the pressure seemed to show when Genpact lowered its revenue guidance for 2013. The company has moved into the IT space in recent times to address the new customer preferences, but that journey is just beginning to take off.

TCS offers BPO services for the banking, financial and insurance sector, retail and consumer packaged goods, drug development, telecom, media and manufacturing. It has invested in building domain expertise and made acquisitions to fill gaps in their portfolio. TCS bought the captive BPO arm of Citigroup for $505 million in October 2008, one of the largest acquisitions in the IT-BPO space till then.

IDC analysts Mukesh Dialani, Lisa Rowan and Melissa O’Brien, in a report last year — titled ‘TCS business process outsourcing services: In pursuit of excellence’ — said TCS had made occasional acquisitions to plug in the expertise gaps, combined its domain expertise with analytics skills to provide business insights to customers seeking agility and risk management, and created platforms on which it could build and deliver business process as a service (BPaaS) solutions, thereby assisting customers with pre-configured industry-standard processes.

Increasing adoption of platform-based services to mine existing and new clients through a consulting-led approach has given integrated IT-BPO providers an edge over standalone BPO players.

TCS, for instance, uses Oracle’s platform to offer finance and accounting solutions for enterprise finance operations. It uses its own BaNCS insurance platform to offer core insurance, reinsurance, and accounting functionalities. “Today, BPO offerings are focused on selling a service based on a platform to reduce operational expenses. TCS has built vertical-led capabilities and domain expertise both organically and inorganically,” said Siddharth Pai, president in outsourcing advisory firm ISG’s Asia Pacific region. He, however, said rankings of BPO businesses could be misleading, given the lack of clarity in how revenues are being apportioned between IT and BPO by companies that have both.

Vipul Khanna, senior VP of Cognizant’s business process services, said business and IT leaders in today’s market know they need to balance efficiency with innovation. “Industry-aligned services that weave together consulting, enabling technologies, process work, automation, and business analytics capabilities can help companies drive more meaningful business outcomes,” he said. Cognizant’s BPO business has been growing faster than the company average growth, which itself has been one of the fastest in the industry.


IT companies TCS, Infosys, HCL and Wipro in good spirits over buzz of discretionary boost

January 8th, 2014

Early indications are that 2014 will see an acceleration in spending on information technology outsourcing, which should be visible in the deal wins and commentary as Infosys kicks off the fiscal third-quarter earnings season on Friday. Most industry executives are gearing up for a pickup in discretionary projects as well, in the quarters to come, which are good-to-have but not vital to day-to-day operations.outsourcing35

“The demand environment will be solid, and discretionary spending particularly in the area of digital transformation,” said Ganesh Natarajan, CEO of Punebased Zensar Technologies. “I expect investments in cloud, mobility, analytics and big data to substantially accelerate in 2014 and beyond,” he said.

Spending on discretionary projects is a good indicator of demand.

“We are bullish on the IT services sector, demand remains good in the US and broadly speaking, it is looking better in 2014 compared with 2013,” said Apurva Shah, senior portfolio manager at BNP Paribas Mutual Fund.

While there will be specific challenges, such as the ongoing US immigration overhaul, which could potentially make it more difficult and costly for the Indian IT companies to get visas and outplace consultants, the strongest correlation is with IT spending, Shah said. The fund has an ‘overweight’ view on the sector.

“I think the discussions are encouraging, but we will have to see for them to be able to transfer into budget and the spend for next year, but yes, definitely the early signs are very, very encouraging,”

“In the US, there’s a lot of positive mood,” N Chandrasekaran, chief executive at India’s largest software services provider, Tata Consultancy Services, told reporters last month. “We expect discretionary spending next year to see an uptick based on the conversations we have had.” Even Infosys, which is attempting to regain its growth momentum after lagging the industry in recent times, is more confident of a pickup in spending, and analysts are expecting the company to raise its full-year forecast.

Many analysts expect Infosys to raise its dollar-terms sales forecast for the year ending March 2014 to as much as 12% from the current 9-10%. That matches the lower end of the 12-14% growth forecast by industry lobby Nasscom for the $108 billion sector’s exports. “The discretionary spend, which has kind of disappeared from the market in the last two to three years seems to be coming back,” Rajiv Bansal, Infosys’s CFO told investors at a conference organised by US bank Wells Fargo, about half way through the quarter that ended December 31.

“I think the discussions are encouraging, but we will have to see for them to be able to transfer into budget and the spend for next year, but yes, definitely the early signs are very, very encouraging,” Infosys chief financial officer said.

Typically, the three months ended December 31, are seen as a seasonally weaker period for earnings. Workers go on furloughs, especially among manufacturing clients, and projects see little action during the period from Thanksgiving to until after new year’s day in the export-driven sector’s largest markets, the United States and Europe, including Britain.

Revenue for the top five Indian IT firms will grow between 1.1% and 3.7% in the December quarter compared with the previous three months, Pratik Gandhi, an analyst with IDBI Capital Markets wrote in a note to clients.

Gandhi expects fourth-ranked HCL Technologies to report the highest growth at 3.9%, driven by strong demand for its services remotely managing large data centres while he expects Infosys to post the lowest growth at 1.1%.


IT firms performance may stay muted in December quarter

January 7th, 2014

After a blockbuster September quarter that saw most of India’s top software exporters deliver strong results, analysts expect a softer quarter for companies such as Tata Consultancy Services Ltd and Infosys Ltd because of the holiday season.outsourcing22

For the December quarter, revenue at the top four Indian outsourcing firms and US-incorporated Cognizant Technology Solutions Corp. is expected to grow by 1.5-3% over the preceding three months, according to a Thomson Reuters poll of eight brokerages. In the September quarter, these firms recorded sequential revenue growth of 3-5%.

With furloughs at major client sites and budgets getting postponed to the next fiscal year, Indian information technology (IT) firms traditionally see a drop in volumes in the December quarter. Net profit for the top five firms is expected to grow by about 10%, helped partly by favourable foreign exchange rates. India’s top IT firms generate most of their revenues in dollars.

TCS and Infosys have indicated a weaker December quarter on account of the long holiday season that results in fewer working days at client sites.

At Infosys, India’s second largest software exporter, growth may slow mainly because of the churn within the company.

During a meeting with Nomura Equity analysts in December, Infosys indicated that revenue growth would be choppy over the next two quarters as the company would take time to absorb the recent internal changes put in place by founder and chairman N.R. Narayana Murthy.

“There is an unpredictability in our performance; there is a choppiness in our growth patterns, which I don’t see going away in the near future, unfortunately, because we need to see five-six good quarters of order booking, which will allow me to say, ‘I’m out of the woods’. But till then, you’ll see this choppiness, this volatility in our performance,” Infosys chief financial officer Rajiv Bansal said at a investor conference in November.

Infosys, the former industry bellwether that has seen an unprecedented exodus in its top management in the past six months, will kick off the earnings season and announce its closely watched results on 10 January.

“For almost all the IT vendors, margins would be impacted because of wage increases on the one hand, and a lacklustre revenue growth on the other,” said analyst Sandeep Muthangi of India Infoline Ltd. “Further, barring TCS, Wipro and Infosys, forex losses are likely to have a significant impact on PAT (profit after tax) growth at other IT companies.”

“We expect ~3% (±0.5%) sequential growth for the top 5 IT firms,” said Hitesh Shah, director of equity research at IDFC Securities. “Margins would be in a narrow band in the absence of any major currency movement. However, we expect the commentary to be positive on the back of a healthier demand environment for IT outsourcing.”

Muthangi signalled that despite the lukewarm commentary from Infosys, the company could end up delivering a healthy quarter.

“Although furloughs are a headwind for all IT companies in the December quarter, we estimate that Infosys will record revenue growth of 2% (cc, QoQ) due to continued ramp-ups on its deal wins. We also expect margins to improve for Infosys by 90 bps (basis points) due to its recent cost-cutting initiatives,” said Muthangi.

A number of experts do not rule out the possibility of Infosys increasing the top end of its full-year revenue guidance to 12%, which would bring it at par with average industry growth estimates for this fiscal year. Infosys’s revenue growth forecast for the 2014 fiscal year is 9-10%, after the company raised the lower end of its estimates from 6% following its October quarter earnings announcement.

Experts also pointed out that despite the December quarter being a seasonally weak one, most top firms have performed better in the second half of the year so far as compared to last year.

For the last fiscal year, industry lobby Nasscom had forecast that software export revenues would grow at 11-14%. However, with top clients tightening spending on technology services, the Indian IT sector witnessed its slowest year of growth since the 2008 global financial meltdown and software exports grew at barely 10% for the year.

“A combination of healthy demand environment in North America and early signs of success in accelerating share gains in Europe pose upside risks to our estimates,” said Kotak Institutional Equities in a brokerage note last week.

“The second half of this year has been better than the last year. As we are getting into new year, over the last couple of quarters, we have seen companies doing a little better than last year,” said Sudin Apte, chief executive of outsourcing advisory firm Offshore Insights.

Apte added that growth among the top IT firms would not be divided equally and that polarization in growth rates would continue, with TCS and Cognizant set to consolidate their positions at the top and grow faster than former sector poster boys Infosys and Wipro.

“Sequentially as well, the (December) quarter has been good because initiatives came back, companies started new projects and discretionary spending rose. We have also seen decision-making picking up a little speed,” he said.


Pallonji Shapoorji Mistry’s wealth swells on TCS rally

January 2nd, 2014

Indian-origin billionaire Pallonji Shapoorji Mistry added $2.8 billion to his wealth last year, helped by a 73% surge in Tata Consultancy Services Ltd (TCS) that was the best performance in the BSE Sensex.

An 11% in the rupee against the dollar and optimism about a global economic recovery fuelled the gains in Asia’s biggest software exporter, which is 74% owned by Tata Sons Ltd. As the largest individual shareholder in Tata Sons along with his family, Mistry, 84, has amassed a $14.1 billion fortune, according to the Bloomberg Billionaires Index.

Mistry’s net worth bucked the drop in the assets of Mukesh Ambani, the nation’s richest man, and Lakshmi Mittal, the chairman of ArcelorMittal. While the weakest economic growth in a decade in India and a global steel glut shrank the wealth of Ambani and Mittal, Mistry’s fortunes are seen continuing to swell as TCS earnings growth outpaces that of competitors Infosys Ltd and Wipro Ltd.

“Even within the Indian IT sector that is outperforming, the performance of TCS has been flawless,” Harit Shah, an analyst with Nirmal Bang Institutional Equities in Mumbai, said in a phone interview. “European clients are becoming more open to outsourcing, that is a very flattering sign. US, the other important geography, is picking up too.”

TCS posted a 34% jump in net income in the three months ended September, compared with nearest Indian rival Infosys’s 1.6% profit increase and Wipro’s 20% growth over the same period.

Profit projection

Net income is projected to climb 45% to Rs.5,140 crore at the Mumbai-based TCS in the fiscal third quarter, according to the median of six analysts’ estimates compiled by Bloomberg. That would outpace analysts’ median estimates for profit growth of 12% at Infosys and 18% at Wipro.

Accenture Plc, the second-largest technology-consulting company, last month reported profit that topped estimates as demand for its expertise resurfaced in the US and Europe. Bookings for consulting rose as customers ramped up investing in projects, with Europe recovering from its debt crisis and the US Congress resolving its budget negotiations.
“The overall demand environment remains robust,” Accenture chief financial officer David Rowland told investors on a conference call. The Dublin-based company is considered a bellwether for the information-technology market because its earnings cycle ends a month sooner than competitors.

Mumbai landmarks

Mistry, whose son Cyrus P. Mistry controls the coffee-to- cars Tata conglomerate as the group’s chairman, joined his family’s construction business at age 18. The business was started by Mistry’s grandfather with an Englishman in 1865. Then known as Littlewood Pallonji and Co., it constructed Mumbai’s first reservoir near Malabar Hill.

The Shapoorji Pallonji group has since built Mumbai landmarks such as the Reserve Bank of India (RBI), the building housing the India headquarters of HSBC Holdings Plc, the new building of the Taj Mahal Palace and the Oberoi Hotel. It also constructed the palace complex for the Sultan of Oman.

Mistry’s father received a 12.5% stake in Tata group shares in 1930 for building automobile factories and steel mills for Tata companies. Subsequent purchases from other Tata family members have made the Mistry family Tata Son’s largest individual shareholder with an 18% stake.

Jai Mavani, group executive director at Shapoorji Pallonji, declined to comment on the billionaire’s holdings citing company policy.

‘Quiet group’

“They are a very quiet group which goes about executing its projects and building its businesses rather than seeking publicity,” said U.R. Bhat, managing director of Dalton Capital Advisors India Pvt. Ltd whose UK-based parent Dalton Strategic Partnership LLP manages $2 billion of assets globally. “That’s how they are and that’s how it should be.”

In December 2012, Mistry’s younger son Cyrus, picked in 2011 to lead the $100 billion conglomerate, took over from Ratan Tata, who was the group’s chairman for two decades. Elder son Shapoor P. Mistry took charge as the Shapoorji Pallonji group’s chairman in June 2012. Shapoor once received an 110-acre stud farm as a birthday present from his father.

The Shapoorji Pallonji group, spread across Asia, Middle East and Africa, has annual revenue of $2.5 billion and employs 23,000 people in its real estate, textiles, infrastructure and engineering businesses, according to its website.

Real estate

In November, Shapoorji Pallonji announced an alliance with Toronto-based Canada Pension Plan Investment Board to acquire office buildings in big Indian cities. The pension fund managed C$193 billion ($181 billion), of which almost C$22 billion was invested in real estate, according to the company statement.

This transaction represents our first real estate venture in India, Graeme Eadie, head of real estate investments at the fund, said in an email. Shapoorji Pallonji Real Estate is an experienced operator, developer and general contractor, with an established reputation.

The closely-held construction group contributed $1.6 billion of Mistry’s wealth, while the TCS stake constitutes the biggest chunk—$9.2 billion—according to calculations by Bloomberg Billionaires Index.

TCS climbed for a second straight year in 2013 swelling its market value on 31 December to Rs.4.25 trillion. Its closest Indian competitors Infosys and Wipro, also beneficiaries of a weaker rupee and rebounding global economies, rose by 50% and 59%, respectively.

‘Key risk’

Shares of TCS are projected to climb 8.3% to Rs.2,332.99, according to the consensus 12-month target price of 58 analysts’ estimates compiled by Bloomberg.

The company’s price-to-estimated earnings ratio of 23 versus 19 for Infosys and 18 for Wipro, makes it more expensive, according to Taina Erajuuri, who helps manage more than €2 billion ($2.8 billion) of assets at FIM Asset Management Ltd in Helsinki.

TCS valuations continue to be at a premium to peers including Infosys and Wipro posing a key risk to the stock price performance going forward, Erajuuri said in an email. Also, the December quarter was a seasonally weak period for revenue growth due to furloughs, leaves and holidays, she wrote.

‘Crown jewel’

“The software-services exporter signed eight large deals in the fiscal second quarter and the demand pipeline looked strong,” chief executive officer N. Chandrasekaran said on 15 October. A week later, TCS said it had won a deal to manage Bombardier Inc.’s data centers in Germany.

“TCS is definitely the crown jewel for the Tata group,” said Bhat. “Given the rather big lead that TCS now enjoys over its peers, unless it makes a dramatic strategic mistake, which appears unlikely, it should enjoy the pride of place among the IT companies in India.”

Goldman Sachs Group Inc. in October said the software provider is well positioned to record sector leading revenue in an improving demand scenario and upgraded the company to buy. The stock is recommended for investment by 49 of the 70 brokerages whose ratings Bloomberg compiles.

“TCS has been a huge wealth creator for investors,” said Nirmal Bang’s Shah, referring to Mistry’s holdings. “Maximum benefits from this are bound to flow back to the largest shareholder of Tata Sons, which in turn owns the largest chunk in TCS.” Bloomberg


IT companies annual bash boost 5-star hotels kitty

January 1st, 2014

Information technology companies are loosening their purse string and are spreading the festival cheer among their employees despite tough business environment in the country. outsourcing5

While Tech Mahindra hosted its annual party at the JW Marriott in Mumbai, Accenture held its annual parties bash in a hotel in Bangalore and Cognizant Technology Solutions opted for a star hotel in Chennai. Following suite was Yahoo that hosted the year-end bash for over 2,000 employees and their families at the KTPO convention hall in Whitefield.

Other companies including IT giants like Intel, Broadcom, Flextronics, Tata Consultancy Services, IBM, Firstsource, and iGate have either conducted or in process of hosting their annual parties or yearend parties in the plush five star hotel- giving a boost to their banqueting revenue.

“No companies are shying away from holding year-end parties and are doing more even during difficult times. We do not see any kind of de-growth or cut on spending by IT companies,” says Rajneesh Maller head food and beverage at ITC Gardenia, Bangalore. ITC has hosted over eight year-end parties for multinational IT companies in Bangalore.

While hotels benefits from large business, IT companies too can avoid the hassle of dealing with 5-6 vendors for hosting such parties outside. The hotels not only cater to their food and beverage requirement but also take care of event management, party themes and housekeeping among others. This has led to as much as 15-20% jump in F&B businesses of hotels in the last quarter.

“Most people are optimistic about the year ahead and there is bullishness in their approach. Spending on their associates and giving them such events is also more of a motivation for the employees,” says Anuraag Bhatnagar, area general manager of Starwood Hotels in Mumbai & Pune, for whom such events contributes 15-20% of the banqueting and catering business. IT companies have also increased their budget by 15-20% compared to last year, he adds.

Both domestic and multinational IT firms are witnessing a strong rebound in the US market and is expecting a recovery in Europe too. Further, American companies are also expected to increase their technology budget in 2014 with the share of outsourcing budget set to grow faster. According to Nasscom, the domestic IT sector is expected to grow by 12-14%, while IT exports are likely to reach $86 billion in the current fiscal ending March 2014.

Tech companies who are optimistic of business growth in FY15 are booking banquet halls for year-end events which include reward programs for their employees and family. Some of these events are theme based while most of it also has games, music, dance, special performers and F&B dining. These get-together events can be as small as 50-100 people or even as large as 5000 people.

“The number of parties has increased. Now IT companies host Diwali as well as Christmas parties, whereas earlier it was only one of them,” says Roshan Rajpal, director of sales and marketing at Ibis & Novotel Bengaluru Techpark.

A meal with liquor at a five star hotel costs around Rs 2,500 per person, while the F&B cost per person can also be anywhere between Rs. 1400-1500 when the liquor is paid as per the consumption. However, this does not discourage companies from holding their year-end parties at such expensive locations. According to hoteliers, average price range for such parties would be around Rs.25-35 lakh for 300-350 people, only on food and beverages.

“Companies are trying to create a positive environment by hosting annual and year-end parties,” says Nitesh Gandhi, general manager at Trident, Gurgaon. The hotel is in the process of conducting a year end bash for the senior leadership team of a leading multinational IT firm. Growing business from IT firms has benefitted hotels that have also increased the rates, as compared to last year, to rake up higher revenues during festive season. “Five stars are nowadays viable for the companies who have a specific budget for such events,” says Shubham Chandra, director of sales and marketing, Hyatt Regency, Chennai. For the hotel 20-25% of the banqueting and catering business is contributed by MNC’s and IT companies which spend especially on the employees.

A detailed email sent to IT firms did not elicit any reply.

Indian hotel industry is undergoing pressure over the last one-year with hotel occupancy dropping to a decade low of 58.3% in 2012-13. The average room rates too dropped to Rs 6,214 in the year, the lowest in six years, according to hotel consultancy HVS.


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