Shivani Shinde & Kirtika Suneja in Mumbai
India's mid-cap software companies may shed as much as 10 per cent
of their workforce as revenues and margins have shrunk owing to a global
slowdown, analysts say.
Compared with the top-5 domestic software-makers, mid-cap
companies' second-quarter margins and revenues have been adversely impacted due
to foreign exchange losses, failure to diversify business, and a drop in
revenue because of the slowdown.
"In terms of margins and revenues, the tier-II firms were hit 30-40
per cent more than the top-5. These firms might see a layoff of 5-10 per cent
in the next few quarters," said Avinash Vashishtha, CEO and MD, Tholons. "It is
important for the mid-cap companies to diversify their business."
Second-quarter figures of mid-cap IT firms were a mixed bag. Rolta
India [Get Quote] had to set aside Rs 61 crore (Rs 610 million) as provisions
for outstanding FCCBs, despite growth in all three business verticals. This
impacted the net profit of the company, which dropped by 55 per cent.
Rolta's enterprise information and communication technology
vertical revenue more than doubled to Rs 91 crore (Rs 910 million) while the
GIS segment and engineering design vertical grew by 24 and 42 per cent
respectively on a year-on-year basis.
Firms such as Tech Mahindra [Get Quote], Patni and NIIT [Get Quote]
Tech have registered positive growth in revenue and bottom lines, but analysts
are cautious about their future growth.
"Patni continues to disappoint us. We haven't heard anything
significant from the company. Similarly, while Tech Mahindra did deliver good
numbers this quarter, its dependence on a few clients is worrisome, especially
in this scenario," said an analyst.
A positive for Tech Mahindra is its order book of $2 billion,
spread over the next five to seven years, as it gives the company good
visibility. Analysts, however, say the company has not been able to book
significant revenues as yet, from its largest-ever $1-billion BTGS deal.
"Rupee depreciation hit us strongly as we had taken forward
contracts at Rs 46. We plan to liquidate them in this quarter," said Vishnu R
Dusad, CEO and MD, Nucleus Software.
Nucleus, which saw a 75 per cent fall in its net profit might see a
delay in customer spending, say analysts.
Still, the layoffs and impact may not be uniform for all mid-cap
companies. Firms such as Infotech Enterprises [Get Quote] and 3i Infotech have
managed to perform well on account of focus on the domestic market and niche
business offering.
The Mumbai-based IT products and solutions firm 3i Infotech was a
rare case, where the company revised its FY09 revenue guidance upwards.
For 3i Infotech, the company's strategy of growth through the
inorganic route is paying dividends in such a situation. Inorganic growth
contributed 74.6 per cent to the revenues on a y-o-y basis.
Net profit of the company was up 24 per cent sequentially and 67
per cent on a y-o-y basis. The company revised its revenue guidance for FY09
between Rs 2,200 crore (Rs 22 billion) and 2,300 crore (Rs 23 billion) from Rs
1,700 crore (Rs 17 billion).
"3i Infotech continues to perform well. The only concern is from
its products earnings, which is 50 per cent of its revenue. In such conditions,
clients are not keen on investing into anything new. Rather, they focus on
increasing efficiency from the existing systems. This kind of mindset could
impact the company in the future," said an analyst.
Hyderabad-based Infotech Enterprises has been another firm that
bucked the trend. With top line growth of 10.4 per cent q-o-q, the company in
dollar terms crossed the $50 million mark for the first time and registered a
growth of 5.2 per cent.
On a year-on-year basis, top line grew by 28.4 per cent in dollar
terms. In comparison, many of the top IT firms reduced their dollar guidance
for the coming quarters.
"Infotech has clearly performed well. There were no major slowdown
impacts on the company's operations. The visibility is good, and overall the
business model is good," said Harit Shah, research analyst, Angel Broking.
However, others could not gain much despite their niche offerings
and segment focus. For instance, Sasken [Get Quote]. It's profit fell by 28 per
cent in the second quarter ended 30 September.
Sasken also downgraded its FY09 guidance in dollar terms, from the
earlier estimated 20-25 per cent y-o-y growth, the company now estimates its
services business to grow by just 10 per cent y-o-y.
"Sasken has been a bit of a disappointment. The main portion of the
business is still not steady. Besides, some of the deals that the firm entered
are yet to mature, especially with Nokia," said an analyst tracking the firm
http://www.rediff.com/money/2008/oct/29it.htm
Rich get experience. Experienced get rich.
--~--~---------~--~----~------------~-------~--~----~
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
-~----------~----~----~----~------~----~------~--~---
