A section of the market believes that Indian IT could come under severe pressure following the 10% cut we saw in Accenture. Is it a very simplistic argument or do you think the valuation cushion is not there and indeed Indian IT stocks could come under pressure? There is a big growth guidance pullback from Accenture?
Sandip Agarwal: Accenture and other tech stocks in the US have run up very sharply in the last few months and compared to that, Indian IT has not moved much. Also, we are comparable to a part of the Accenture business which is the managed services and the outsourcing part. I do not think there is much weakness in that.
In fact, Accenture itself mentioned on yesterday’s call that they expect a mid-single digit kind of growth there and that is the business which we replicate. So, the challenge is on the discretionary side or on the consulting side, where we have small presence for some of the names like TCS and Infosys but for them, it is not a big chunk like it is for Accenture at 50%. So, it will be difficult to believe that we will have similar growth.
Also remember amd this I have been saying this for some time that whenever the guidance cuts happen or wage hikes or salary hikes get postponed, bonuses get postponed that is the last leg of the cut or it is the last leg of weakness and post that, things recover fast because we execute at the cheapest price for the world. I think we will not have that kind of impact and if that kind of impact is seen, I think the large name should be bought, that is the way we look at the sector.
That is exactly what I wanted to ask you. So, what are the big names that you would recommend buying if they were to fall in line with say an Infy and Wipro ADR which have seen a fall of about 4% overnight?
Sandip Agarwal: Companies like HPL, Tech M, Wipro are still trading at a very reasonable valuation. These are depressed earnings and on depressed earnings, the multiples may look reasonable but they are actually much lower.
I think these are the names which investors should accumulate if they have a 1 to 3 or 4-year view. If a correction happens, even Infy, TCS looks like a very good buy because the key factor is how many people have been trained in the new technology. Accenture has already trained 62,500 in generative AI. I think this technology is now proven and maybe one or two quarters later, we will see good deals coming in. So, for long-term investors, this is the right time to start accumulating.