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Out of 100 digital companies, 75 may get wiped out: Raamdeo Agarwal

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Out of 100 digital companies, 75 may get wiped out: Raamdeo Agarwal

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In an exclusive interview, market guru Raamdeo Agarwal told CNBC-TV18 that there will be consolidation in the digital space and things will settle down in 3 to 4 years. He is bullish on Indian IT companies, like TCS, Infosys, Wipro etc., as he sees corporates shelling out more to go digital.

Market veteran Raamdeo Agarwal believes that the digital space will see consolidation and expects around 75 percent of companies to wind up. He further believes that once the dust settles, two-three large players will emerge in each category.
In an exclusive interview with CNBC-TV18, he said, "We're just about four or five years old in terms of the digital economy and you are seeing the early version of these businesses. There will be a high mortality rate -- out of 100 companies, maybe 70-80 might just get wiped out," he said.
It is not all gloom and doom though. Agarwal is bullish on the Indian IT sector's growth potential with the world going more digital by the day as the segment has the highest competitive advantage.
"I think there is a tech boom on and there's actually no competition from any other country for this space. I'm hearing that people with 3-5 years experience or some specialty in some technology are being given some humongous increases," he said.
"I think the corporates will have to pay a lot more eventually for their services, even if it is coming from India. So I think it's a very interesting time," he added.
How will this impact Ramdeo Agarwal's portfolio? The market veteran plans to tilt his portfolio more towards services than manufacturing.
The earning season is underway and TCS and Infosys, the two biggest players in the IT sector space, have managed to just meet street expectations in the case of the former and missed the mark in the latter's case.
Agarwal noted that margins have declined across sectors in this quarter because of the high commodity prices as a result of the ongoing Russia-Ukraine war.
"Though the earnings growth is more like 23-24 percent for the entire Nifty, the margins are declining in every sector. So I think in Q1, which will be the June quarter, the loss of margin will be more intense and much more widespread," he said.
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