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146.35 (7.02%)
19-Apr-2024 | EOD
Industry Update Back
Technology: Riding cyclical tailwinds amid structural challenges
21-Mar-2018

  • Majority revenue from repeat business, a continuous rise in the count of multi-million dollar bucket clients and high RoICs are all indicative of Indian IT's sustained competitive advantage or economic moat.
  • However, we note that competitive advantage is only one of the determinants of the growth advantage. Other factors such as maturity, penetration and value migration have their implications too, fueling the thesis of Indian IT's current range-bound growth of mid-to  -high single-digits.
  • As MOSL's latest Wealth Creation Study highlighted,  an economic moat without high growth leads to quality traps -stocks of such companies often under perform the benchmark indices. This is what we have observed in tier-1 Indian IT. In our view, this growth thesis also makes an early case for sustained uplifted multiples for tier-2 players.

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