An industry-defining $3.2-billion deal win for Infosys and nearly a $1-billion contract for Wipro as 2020 winds down shows that the domestic IT services’ firms have weathered the pandemic far better than any other sector.
Analysts tracking the IT sector say that such blockbuster wins for most of the calendar year clearly indicate that the global multinationals have placed their bets on Indian IT companies to drive their digital journey. “These wins, for some of them the largest-ever, truly highlights Infosys and Wipro’s success in their large deal strategy and also helping clients to navigate in every aspect of their digital journey. This deal also reinforces that companies are aggressively using digital transformation as a tool to reduce their cost and increase their productivity,” Aniket Pande and Aditi Patil, analysts with Prabhudas Lilladhar, said in a note to the investors.
On Monday, Wipro in a filing with the stock exchanges said it has signed a mega-deal with Metro AG that provides minimum revenue commitment of $700 million over a period of five years and minimum $1 billion in case the deal gets extended by another four years to a total duration of nine years. The transaction, however, requires antitrust approval from the German Federal Cartel Office (FCO) and Antimonopoly Committee of Ukraine. The deal will also need a nod from the German Federal Ministry of Economics and Energy. The transaction is expected to close by April 30, 2021.
The next day, Infosys announced a bigger deal win — considered as its largest ever — when said that it has won a contract from Daimler to transform its IT operating model and infrastructure landscape across workplace services. The deal size, according to analysts, is worth $3.2 billion. Analysts point out that the value of new deals won for Infosys in the quarter equals net new deals of the previous five quarters. Infosys won 16 large deals in Q2 FY21.
Following the deal wins, Infosys shares closed at ₹1,252, about 2.6 per cent higher than the previous closing price while Wipro gained 5.7 per cent to end the day at ₹384.95 on the Bombay Stock Exchange.
What is significant about these contracts is that they are mostly people-takeover deals, with Infosys alone integrating more than 16,000 employees through other partnerships in recent years.
Analysts point out that aggression in deal wins for Wipro has continued even in the third quarter — usually a weak quarter — with the IT Services’ company winning five deals Olympus, Thoughtspot, Fortum, and Verifone apart from the Metro AG. “Wipro has truly surprised street with its aggression, sharpening focus on large deals and focused sales. Under the new CEO, Wipro has made a solid beginning and we believe that the gap in growth rate will reduce when compared to peers,” the analysts said.