India's top IT companies reported healthy deal wins in the June quarter, but delays in project ramp-ups and execution are slowing the conversion of those contracts into revenue, according to company executives and analysts.
Persistent Systems Chief Financial Officer Vinit Teredesai said deal wins alone were not enough. "It also matters how much of that is translating into revenue," Teredesai said.
"I can say I'm winning so many deals, etc. But at the end of the day, if these are not translating into revenue, everybody is going to question what is your capability and maturity."
He added, "We should be in a pretty good stage to sort of reach the 2 billion mark in FY27... But... execution is the key to everything."
Deal wins represent the total value of contracts signed with clients, while revenue is recognised only as projects are executed over time. As a result, delays in project ramp-ups or implementation can slow the conversion of bookings into reported revenue despite a healthy order pipeline.
Analysts from ICICI Securities noted that Tata Consultancy Services' 0.4% sequential constant currency growth in the first quarter reflected "the deferral of deal ramp-ups", adding that improvement in total contract value (TCV)-to-revenue conversion would be one of the key indicators of a recovery. TCS reported deal bookings of $9.5 billion during the quarter, down from $12 billion in the previous three-month period.
This comes as several companies reported healthy order books and total contract values. TCS reported deal bookings of $9.5 billion, HCLTech posted its highest-ever first-quarter net new bookings of $2.4 billion, Tech Mahindra recorded its third consecutive quarter with more than $1 billion in deal wins, Infosys signed $3.6 billion in large deals, LTM reported order inflow of $1.68 billion and Persistent Systems reported its highest-ever quarterly total contract value.
Revenue of top Indian IT services companies is seen to grow only 1-3% in FY27, according to a report by Crisil Ratings released in July. The outlook is dim for the next financial year as well, given AI-driven disruptions, weak discretionary spending by clients and continuing geopolitical uncertainties, the report said.
"Rising adoption of AI-native solutions is intensifying pricing pressure, triggering deal renegotiations and slowing execution as clients reassess technology spending," said Anuj Sethi, senior director at Crisil Ratings. "At the same time, weak discretionary spending and uncertainty in the US and Europe continue to weigh on demand. This will keep revenue visibility modest over the near term."
Wipro also linked revenue growth to the pace at which contracts are implemented.
"When you don't ramp up, bookings don't convert to revenues," management said during its quarterly interaction.
LTM said some project ramps had shifted into the second quarter, including work related to the Income Tax programme, adding that these engagements were expected to contribute more meaningfully in the coming quarters.