Indian IT Firms Doing Chinese Operations Is Working With 80% Capacity! Chinese Economy Back On Track?

As per the reports, the companies with a presence in China are back in business with easing of restrictions, while India extended its lockdown further till 3rd May. 

How Are Things In China?

The trade association Nasscom has said member companies across the sector are operating with almost 80% attendance.

Basically, the lockdown in China which began late January and lasted till last week saw the technology industry taking a hit with the Asian country being a hub for telecom and well as electronics manufacturing. 

Not only that, the Indian businesses with a presence in China now see green shoots as operations return to normalcy.

The senior director, Global Trade Development, Nasscom, Gagan Sabharwal said “As per the information available to us from our member companies, most of the China services sector is now back in office with 80% attendance. Albeit with physical distancing norm and with automatic temperature checks at entry to offices, frequent use of sanitizers, staggered breaks for lunch, only pantries that are licensed can offer food, no makeshift pantries allowed, etc,”.

Further he said there are companies who still prefer to carry out tasks that can be handled from home and this general trend will continue for some time.

What About Other Companies?

Another company, Data networks integrator Sterlite Technologies Limited (STL) said, while its China unit is operational and is providing fibre for global demands, the current India demand is still being managed from the inventory in India under the essential services delivery. 

The Group CEO, STL, Anand Agarwal said,“(STL’s) China unit is operational and providing fibre for global demands as well as China demand – the unit is gradually coming back to pre-covid level utilisations and has orders for deliveries,”.

How Does Lockdown Affect The IT Sector? 

According to analysts’ opinion, the revenues of IT firms could be impacted in the first six months of FY21 because of covid-19. 

Following the early lockdown in China, global IT companies like Accenture had already revised their guidance for the year factoring in the pandemic.

Recently, India’s second largest IT company Infosys, which has a large presence in China has indicated an impact of $8-10 million (0.3 percent of quarterly growth) due to lost billings in China, though presence in Italy is small in the upcoming Q4 results.

While, many others have been reassessing their guidance for the upcoming quarters following the extended lockdown in China and now India. 

The lockdown has resulted in lower utilisation of workforce across critical and high security applications, apart from constraints on physical movement. 

However, the fact that business is returning to normalcy in the region, albeit cautiously, is a positive for the sector.

Tech Mahindra, the Information technology services major, has been present in China for over 15 years and involved in over 2,000 projects. 

Currently, it had suspended operations in Wuhan due to the lockdown but was functioning in other regions of China.

 Prior to the lifting of the lockdown in Wuhan, MD & CEO, Tech Mahindra, C.P Gurnani said, “The centres in Shanghai and Beijing were operational. We are constantly monitoring the situation and are working in accordance with the government’s orders and guidelines,”.

The companies like Infosys and HCL Technologies have guided for a double-digit growth in revenues in FY20, market leader Tata Consultancy Services is expected to post high single digit revenue growth. 

On the other hand, Wipro is also expected to improve its performance in the fourth quarter results to be announced on 15 April.