Indian IT majors deal with spillover from pandemic boom

Opening Bell 🔔 is Tech in Asia’s free newsletter, which brings you the biggest news and latest trends around publicly listed Asian tech companies. [Read from your browser]( Opening Bell 🔔 Welcome to the Opening Bell! Delivered every Monday via email and through the Tech in Asia website, this free newsletter breaks down the biggest stories and latest trends on Asia’s publicly listed tech companies. If you’re not a subscriber, get access by [registering here](. Hello {NAME} Growing up in the early 2000s, I recall often wondering how large IT parks started popping up across my hometown, seemingly out of thin air. Empty streets were soon filled with legions of office-going folk on their daily commute to work. India’s IT sector ensured the country did not miss out on the globalization gold rush of that era, when the internet slowly began tightening its grip on the modern world. The contribution of the IT space to India's gross domestic product has risen from 1.2% in 1998 to 8% in 2020. Furthermore, the sector is set to become a US$227 billion industry in fiscal year 2022 and is expected to register a 15.5% growth, which is the highest in over a decade and almost twice the rate of the Indian economy. So, despite fattening profits and rising revenues, why then has the [Nifty IT subindex (.NIFTYIT)]( which tracks the performance of the IT space in India, fallen nearly 16% this year? Global macroeconomic factors such as inflation and the Russia-Ukraine war have certainly weighed. Infosys (INFY, NSE), India's second largest IT firm, joined the corporate boycott of Russia over the invasion of Ukraine earlier this month. Another factor driving negative investor sentiment is the fear of growth normalization in the sector after a pandemic-led boom. Digital transformation spurred by funds streaming into tech services such as cloud computing and cybersecurity during the Covid-19 pandemic propped up demand for services provided by Infosys and rivals Tata Consultancy Services (TCS, NSE), Wipro (WIPR, NSE), and HCL Technologies (HCLT, NSE). This lifted the Nifty IT services index 60% last year. The National Association of Software and Service Companies has [pointed out]( that before the pandemic, Indian IT firms were reporting annual growth rates of around 6% to 7%, which have now increased to around 15% to 20%. However, India’s big IT companies have so far crumbled under raised market expectations and have ceded some of their spectacular gains from 2021. TCS and Infosys both posted fourth quarter profits [below expectations]( this month. Margins have also come under pressure as operating expenses rise due to a [talent war]( in the space. The entry of VC-backed startups, which compete for the same talent pool, is driving up the IT industry’s compensation metrics, leading to higher attrition rates. Meanwhile, over in Indonesia, it is the VC-fueled Bukalapak (BUKA, IDX) making waves on the stock market. The ecommerce behemoth has staged something of a comeback after a dreadful start to its life as a public company. Its shares have risen nearly 20% in the last month. With the firm showing resilience under the gaze of the public spotlight, Tech in Asia highlights its leaders who are steering the company in its post-IPO era and their unusual Australian connection in this [visual story](. -- Shravanth 4 STOCKS TO WATCH Hot stocks, earnings reports, restructuring, activist investor pressure, and more. We feature the stocks that are likely to make big moves during the week. 🇮🇩 GoTo Group (GOTO, IDX) The greenshoe option under the tech titan’s recent public listing has been [triggered]( after share price declined to its initial offering price of 338 rupiah (around US$0.024). This option, while only a short-term solution, allows a brokerage, acting for its client, to buy shares on the secondary market at an agreed price, thereby putting a floor under the share price. The terms of GoTo’s agreement with its broker limit such purchases to 6.1 billion shares, which can only be done for a period of 30 days from the IPO. 🇨🇳 Didi Global (DIDI, NYSE) In the latest sign of retreat as it prepares for a delisting from the US stock market, the ride-hailing firm has decided to [shut down]( its food delivery business in Japan. Didi Food Japan is set to end its services on May 25, with most of its 200 employees being laid off. The company will focus on its ride-hailing services in the country, which is operated by a separate entity, Didi Mobility Japan. 🇯🇵 SoftBank Group (9984, TYO) The Tokyo-based firm [plans to sell]( a smaller portion of UK-based semiconductor company Arm than originally expected through an IPO. SoftBank plans to retain a controlling stake in the firm. The Japanese conglomerate opted for an IPO of Arm after a plan to sell the business to Nvidia (NVDA, NDAQ) collapsed earlier this year. Arm’s IPO will likely happen in the first quarter of 2023, with SoftBank seeking a valuation of at least US$60 billion for the chipmaker. 🇹🇼 Gogoro (GGR, NDAQ) The electric scooter maker has a healthy supply of chips for now but could face a [semiconductor squeeze]( by year-end as it pushes plans to expand in China, India, and Southeast Asia. Gogoro currently generates around 90% of its revenue from Taiwan. The firm made its market debut earlier this month via a merger with blank-check firm Poema Global and has a market value of around US$2.4 billion. However, its shares have already lost a quarter of its value as the company becomes the latest victim of a broader market decline. 3 MARKET WHISPERS A lot more reliable than whispers, we highlight engaging source-based reporting from reputable news outlets around the globe. 1️⃣ Pivot toward Hong Kong Dmall plans to submit an application [to list]( on the Hong Kong Stock Exchange this quarter. The China-based ecommerce platform abandoned earlier plans for a US$500 million IPO in the US after the declining market values of other listed online retailers, such as MissFresh (MF, NDAQ). Beijing’s stricter supervision of Chinese firms listed offshore also pushed Dmall to put its US IPO plans on the backburner. 2️⃣ M&A action awaits at the peninsula India's Reliance Industries (RELI, NSE) is [exploring a bid]( for drug retailer Walgreens Boots Alliance's (WBA, NDAQ) Boots business. UK-based Boots, which has 2,200 stores in the country, is being valued at up to 8 billion pounds (US$10.5 billion). Meanwhile, L&T is [considering a merger]( of its publicly traded IT companies Mindtree (MINDTREE, NSE) and L&T Infotech (LTI, NSE). Combining both firms would create an entity worth around US$22 billion. 3️⃣ Foxconn ramps up iPhone manufacturing in India Foxconn Technology (2354, TPE) plans to [nearly double]( the headcount at its Chennai plant amid higher orders from iPhone maker Apple (AAPL, NDAQ) that is expected to post record numbers in 2022. A little over 10,000 of the total 15,000 workers have returned to the company-provided accommodations inside Foxconn plant premises near the coastal city of Chennai. 2 EYE-POPPING FACTS Tech in Asia scours the internet to bring you the head-turning numbers from the world of business. - [US$115 million]( - This is how much Asia-focused SPAC Aura Fat Projects raised from its IPO on the Nasdaq. The blank-check company is co-sponsored by financial services provider Aura Group and venture firm Fat Projects, both of which are headquartered in Singapore. - [3.6 million]( - This is the number of subscribers lost by Reliance Industries’ telecommunications arm Jio in February, as per data released by the Telecom Regulatory Authority of India. Meanwhile, rival Bharti Airtel (BRTI, NSE) gained 1.5 million subscribers during the same period. THE 1 YOU DIDN'T SEE COMING We spotlight the unusual, not-your-everyday kind of story that has got everyone talking and social media buzzing over the past week. Musicians and power providers step into the crypto world Anyone witnessed Netflix’s (NFLX, NDAQ) dramatic fall from grace last week? The streaming giant had US$50 billion [wiped off]( its market value in a matter of days after reporting its first loss of customers in a decade. However, the Netflix onslaught was not the sole head-turning news of the week. In this [premium story]( my colleague Melissa breaks down how musicians, tired of getting the short end of the stick when selling their work, have turned to [NFTs]( for a bit of reprieve. Not one to miss out on an opportunity, Thailand's biggest private power producer by market value, Gulf Energy Development (GULF, BKK), also stepped into the crypto world after [entering]( into a joint venture with cryptocurrency platform Binance. The partnership brings the latter’s digital asset exchange business into the country. That’s it for this edition - we hope you liked it! Not your cup of tea? You can unsubscribe from this newsletter by going to our preference center at the bottom of this email. Happy investing and see you next week! Disclaimer: This content is for informational purposes only. Kindly do not construe any such information as legal, tax, investment, financial, or other advice. [ADVERTISE]( | [SUBSCRIBE]( | [HIRE]( | [FIND JOBS]( P.S. Don't miss out on the biggest tech news and analysis. Add newsletter@techinasia.com to your address book, contacts, or safe sender list. Or simply move us into your inbox. Too many emails? Switch to a different frequency or get new content through our [preference center]( or [unsubscribe](. You can also break our hearts and remove yourself from all Tech in Asia emails over [here](. Copyright © 2022 Tech in Asia, All rights reserved. 63 Robinson Road, Singapore 068894