Pessimism over the prospects of information technology companies may be overdone, feels Vetri Subramaniam, Group President and Head of Equity, UTI Asset Management.
In an interview with Moneycontrol, Subramaniam says the industry is not in dire straits as the market is making it out to be.
“The growth (in IT) rates have come off, but for most companies, the return on capital is high compared to other sectors and the cash flows are strong,” he says, adding, “the real challenge for the companies is how to deploy the cash flows; should they acquiring other firms in an uncertain business environment or be returning money to shareholders.”
Once the darling of money managers and retail investors alike, stocks of IT companies now figure way down the pecking order on buy lists. Revenues as well as profit margins in traditional offerings have shrunk dramatically, and it will be a while before the new business lines are able to offset that.
