The Hindu Business Line : Satyam issue to dull interest in bellwether IT results

Bangalore, Jan. 12 The Satyam fiasco could diminish the interest in IT earnings for December quarter that may provide a peek into the next fiscal, which would feel the full impact of the economic downturn.

Large IT services firms, despite a drop in volumes due to decline in demand, may post a modest growth for the seasonally weak December quarter, aided by a weak rupee. However, the cross-currency fluctuations might force companies such as Infosys and Wipro to miss their dollar term forecast.

“This may be just the beginning of a painful period for Indian IT companies,” said Mr Harit Shah, Analyst at Angel Broking Ltd. “Visibility for FY10 is becoming poorer and with vendor consolidation being witnessed, the uncertainty only increases. Against this backdrop, we expect further downgrade in guidance by IT firms.”

The rupee depreciated by nine per cent against the dollar in the December quarter. However, the US dollar appreciated sharply against other major currencies such as the pound sterling, euro and the Australian dollar, posing cross-currency challenges for the Indian vendors.

Awaiting Outlook

More than the results, the market would be keenly awaiting comments from major players on the demand outlook, customers’ IT budgets, client addition, pricing and volume trends. “We expect companies to be very cautious on near-term outlook and guide to flattish revenues for the next quarter,” said Citi analysts Mr Surendra Goyal and Mr Vishal Agarwal in a note to clients.

Brokerages – including Emkay Global Financial Services, Angel Broking, Sharekhan, Religare Hichens Harrison, Prabhudas Lilladher and CLSA – revealed that the large firms will post a sequential revenue growth of six to seven per cent and four to 14 per cent rise in net profits. Profit margins were likely to remain stable mainly due to the weak rupee, while companies could report lower volumes, utilisation and hiring numbers for the quarter.

Analysts’ count

Infosys, which will announce results on Tuesday, could post a six per cent sequential growth in revenues at Rs 5,743 crore, marginally ahead of its guidance of Rs 5,519 crore and Rs 5,730 crore. Sequential net profit is expected to grow eight per cent to Rs 1,535 crore.

TCS is expected to post seven per cent growth in revenues at Rs 7,446 crore. Net profit would grow by a tenth to Rs 1,387 crore.

Wipro’s consolidated revenue might grow six per cent to Rs 6,785 crore, while its net profits might see an increase of 14 per cent at Rs 940 crore. HCL Technologies, which completed the buyout of Axon Group Plc during the December quarter, may report a six per cent growth in revenues at Rs 2,511 crore and a net profit of Rs 370 crore, analysts said.

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