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Our Bureau

Bangalore, Jan. 5 Large IT firms such as Infosys Technologies Ltd and Wipro Ltd could well miss their December quarter earnings forecast, hurt by lower volumes and cross currency movements, said brokerage firm CLSA.

On an average, the rupee has depreciated 11 per cent compared with the dollar, and the dollar has appreciated 8 per cent against the British pound.

CLSA expects Infosys to miss the lower end of its revenue forecast in dollar terms and at least the upper end of its constant currency guidance. “This indicates that despite the October 2008 cut in estimates, volumes have turned out even worse than Infosys’ own conservative estimates,” CLSA said.

Infosys had projected third quarter revenue to be between $1,175 million and $1,220 million, a year-on-year growth of 8.4 per cent to 12.6 per cent. “A cut in fiscal 2009 revenue outlook is likely on both dollar terms and constant currency terms,” CLSA analysts, Bhavtosh Vajpayee and Nimish Joshi, said in a note to clients.

Tata Consultancy Services is likely to continue with a 3.5 per cent quarter-on-quarter decline in revenue in dollar terms, and the company is likely to end fiscal 2009 with a 8 per cent year-on-year organic revenue growth, which is the lowest among the top-5 vendors.

For TCS, foreign exchange-related loss could surprise on the higher side, depressing reported net income in the December quarter. The company could expect negative comments on volumes from large existing clients, CLSA added.

The brokerage said vendors are likely to avoid comments on fiscal 2010, as calendar year 2009 budgets are still largely in discussion stages and the budgeting process is likely to be delayed again.

The brokerage said it continues to prefer Infosys for expectedly greater fiscal discipline as the slowdown worsens ahead.

On the volumes side, it said it finds HCL Technologies’ run of deal wins intriguing. By proactively targeting Fortune 100 customers, and using greater flexibility in pricing, the company is emerging as a disruptive force in the industry, CLSA added.

It said foreign exchange-related losses are likely to continue, although it would be much lower compared to the last quarter.

However, cancellation of certain hedges and rendering of certain cash-flow hedges as “ineffective” could result in negative surprises in forex losses at TCS, Hexaware and Tech Mahindra.

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