Whenever there is an economic slowdown and the period of recession in a country, businesses shows a downward spiral indicating a negative future for the country. According to a latest update, the recent economic scenario in India is showing signs of fatigue and it is expected that slowdown will hurt profitability of Tier-2 companies. 

It is worth noticing; Tier-2 companies have been reporting an extraordinary growth in revenue and operating profit over the last few quarters at the aggregate level. However, the share of tier-2 IT companies in the total operating profit is now falling at a faster rate than the drop in revenue share, sources informed. 

Delays in decision making and the late rollout of new projects from clients across the US and Europe are touted as the responsible factors for continuously slowing economy.  The operating profitability has started to contract as companies are facing pressure on billing rates.

A glimpse of this trend was visible in the March 2012 performance of tier-2 IT companies, which reported revenue growth of merely over 8 percent, the lowest in any of the quarters in the past two years. 

At the same time, there are few players in Indian IT including Hexaware Technologies, Infotech Enterprises, KPIT Cummins, MindTree, and Zensar Technologies, which have shown some signs of growth in profits.  These firms indicate, rise in operating profit by nearly 19 percent and jump of 29.4 percent in net profit. 

Acknowledging the same scenario, only select players of Indian IT are likely to report growth, while a majority of the companies would find it difficult to remain profitable in quarters to come. 

Seems, margins of medium and small IT players are under higher pressure compared to their bigger counterparts. 

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