NEW DELHI: Information technology firms are expected to post revenue growth in the range of 5-9 per cent in the second quarter this fiscal on account of weakness in rupee against the dollar, analysts say.
"The top line of frontline IT companies is expected to grow in the range of 5.6-9.3 per cent quarter-on-quarter in the second quarter this fiscal driven by depreciation of the rupee against the US dollar, which is likely to boost the top line growth by 4-4.5 per cent on a sequential basis," domestic brokerage Sharekhan said in its IT earnings preview report. IT major Infosys would kickstart the quarterly earnings season from October 10, followed by HCL Technologies which would come out with its corporate results on October 15 and Satyam Computer Services on October 17. The rupee has sequentially declined against the dollar in the Q2, 2008, which is likely to benefit some of the frontline IT stocks like Satyam and Infosys, which had hedged their positions at the lower end of Q1, 2008, the report stated. On the other hand, Wipro and HCL Technologies had higher hedge position, while in case of TCS, the forex losses would be limited on account of higher portion of options in its hedge position, it added. Rupee has been sliding against the dollar since April and at present has an exchange rate of about Rs 47 against a dollar. As of September 30, rupee stood at 46.47 against the greenback compared with 42.92 on June 30. On a quarterly basis, the rupee has fallen nearly 8.27 per cent. The present rupee level is, however, well above the mark at which the research firms have predicted for the current fiscal, even as pricing pressure continues. Another firm Motilal Oswal said in its IT earnings preview report that the revenue growth of the firms would be driven by 3 per cent volumes growth, amidst flat pricing. "We have revised our average rupee per US dollar rate for FY 09 to Rs 43/USD and for FY10 it is Rs 42/USD, respectively," the report said. The report states that concerns of demand slowdown could propel IT firms to cut staff and go for cost cutting measures. Infosys had guided for 10,000 gross hires during the quarter and the hiring seems to be on track. "We will watch out for any deferral in hiring during the quarter, as also for any change Infosys' hiring guidance of 25,000 and TCS' hiring guidance of 35,000 for the full year," the report stated. "Given Satyam, Wipro and HCL Tech's low hiring last quarter, we expect the companies to add significant headcount in Q2 FY 2009," Motilal Oswal said. The Sharekhan report states wage hike during the period would lead to a 2 per cent sequential fall in operating profit margins. It also projected a healthy improvement in the operating profit margins of Infosys and TCS as these firms had already given wage hikes to their employees in the previous quarter. Although the global financial crisis, which is gradually extending to Europe, does not have a direct bearing on the IT companies, there is a likelihood that their demands might drop. "Such depressing events can result not only in client specific issues, but can also cast a question mark on the overall demand environment for IT companies," it added. However, the report pointed out that the appreciation of dollar against Euro (about 8.5 per cent) would impact the earning guidance of the firms under the US GAAP. "This has led to concerns that some of the frontline IT companies may not meet their Q2 FY 2009 revenue guidance in dollar terms and, in fact, may have to revise downwards their full-year FY 2009 revenue guidance," the report stated. However, the report forecast that the street has already discounted this impact and the sentiments towards IT stocks would improve if the frontline IT companies beat their Q2 FY 2009 guidance and maintain their FY 2009 guidance. Interestingly, the stocks of IT firms have been among the major losers in the past quarter due to the meltdown in the markets during the July-September period on weak US financial market and crisis deepening in the Europe. Infosys scrip lost 19 per cent from Rs 1,710.35 on July 1 to Rs 1,390.95 on October 3, while shares of HCL Technologies, TCS and Satyam also fell between 20 to 27 per cent in the period. http://economictimes.indiatimes.com/articleshow/3562661.cms?from_et_daily_newsltr=1 Life is a bridge. Cross over it, but build no house on it. --~--~---------~--~----~------------~-------~--~----~ You received this message because you are subscribed to the Google Groups "Kences1" group. To post to this group, send email to [email protected] To unsubscribe from this group, send email to [EMAIL PROTECTED] For more options, visit this group at http://groups.google.com/group/kences1?hl=en -~----------~----~----~----~------~----~------~--~---
