Mid-tier IT braces for impact as clients suspend operations

Bengaluru: Mid-tier technology services companies, such as NIIT Tech, Sonata Software, Mindtree and Hexaware, will see revenue drop in the year ahead as large clients including airlines and travel operators suspend operations amid the virus outbreak, analysts said. These firms garner a large chunk of their revenues from one or two big global clients. Dependence on a few clients could “significantly impact” businesses, said Kuldeep Koul, lead analyst, ICICI Securities. While British Airways, Southwest Airlines, Emirates – clients of NIIT Tech and Mindtree have grounded their fleet; TUI Travel, a British leisure travel operator that makes up for around 19% of Sonata Software’s revenue, has seen significant drop in business.

NIIT Tech is expected to see a sharp fall in revenue in the April-June quarter. “One or two clients getting hit has an outsized impact on their fundamentals,” said Koul. Hexaware TechnologiesNSE -2.43 % told analysts that it would see a significant negative impact as one of its large clients had to temporarily suspend operations, impacting a majority of the company’s services to the client. While the company expects profits to be hit by up to 40%, the outbreak will impact its first and second quarter performance.