The Hindu Business Line : BT notice of job cuts wreaks havoc on tech stocks

Mumbai, Nov. 14 British Telecommunications Group’s announcement of a six per cent cut in its workforce seems to have further dampened sentiment for domestic IT stocks.

BT announced it would cut 10,000 jobs, which would include an “indirect” 6,000 jobs.

The stocks of BT’s outsourcing partners in India took a big beating on Friday as investors feared loss of business for these companies.

The majority of the job cuts would be in the UK, with the rest peppered around the world, said BT in a statement. But it is too early to know country-specific job cuts, it said.

IT bellwether Infosys Technologies dipped 3.28 per cent to close the day at Rs 1,259.25. on Friday. The share price of Wipro was down 2.69 per cent at Rs 247.55. These stocks were among the worst performing of the 30 Sensex stocks. Both are BT’s outsourcing partners.

Among BT’s other outsourcing partners, Tech Mahindra was down 5.18 per cent, HCL 2.97 lost per cent and TCS declined 0.4 per cent.

Analysts say that BT cutting jobs could impact the growth of these companies.

“I don’t know. They (BT) are doing a lot of things, but at this point in time it is not clear how they will affect us. We will have to wait and see,” said Mr V. Balakrishnan, Chief Financial Officer, Infosys Technologies.

“We feel that it is too early to comment on the recent development at BT. However, as part of our employee first philosophy, our long-term policy has always been to retain our resources,” Mr A.P. Rao, Senior Vice-President (HR), HCL BPO, said in a statement.

According to sources, HCL has close to 2,000 employees working on BT processes in Northern Ireland and India (offshore). HCL does work in the area of technical helpdesk, tele-calling and back-office processes for BT.

Mr Clive Selley, Managing Director, BT Design, said: “Mahindra is, and will continue to be, a key commercial partner with BT. We have a number of long-term contracts in place with Tech Mahindra that will be unaffected. Going forward, we do not see a material impact on our outsourced activities with Tech Mahindra.”

“As Tech Mahindra has adopted a strategy of signing long-term agreements that have underlying commitments we will be less impacted by BT’s move,” said Mr Sonjoy Anand, CFO, Tech Mahindra.

Market-men said BT’s announcement of job cuts just added to the negative sentiment surrounding the IT sector, one of the dampeners being the depreciating rupee.

Germany falling into recession as it announced a dip in its GDP by 0.5 per cent would also affect the IT companies said market analysts. “Germany and the Eurozone going into a recession would mean that our IT companies would have to be further dependent on America for contracts,” said Mr Alex Mathew, Head of Research at Geojit Financial Services.

The BSE IT index was down 2.47 per cent on Friday, when 12 stocks in the index declined and only two advanced. The IT index has dipped 3.8 per cent in a week and 12.65 per cent in a month.

Patni, NIIT and Tech Mahindra recorded their 52-week lows on Friday.

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