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IT exporters to take a knock on rising rupee, lower billing rates
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IT exporters to take a knock on rising rupee, lower billing rates
According to the estimates of six broking houses and ET Intelligence Group’s estimates, sales and net profit (PAT) for the top four IT exporters — TCS, Infosys, Wipro and HCL Technologies — are likely to grow by 10% and 8.4% respectively in the June 2009 quarter from the year-ago levels. In the preceding quarter, both sales and PAT had increased at a much faster pace of 21% and 12% respectively. On a sequential basis, sales are likely to drop by 3.4% in the June 2009 quarter, while PAT would decline by 5.4%. Sales had remained flat in the previous quarter whereas PAT had fallen by 4.5%.
Analysts are concerned about lower business traction in the first quarter. “We expect sequential volume declines across all tier-I players. Pricing (project based) is expected to decline marginally by about 1%, but the (average) reported pricing should benefit from cross currency tailwinds. Overall, we expect tier-I players to report sequential revenue declines of about 2%,” said a recent Citigroup research report.
Infosys is likely to see a higher pressure on its volumes compared to other players. “We estimate volume decline of 3% for Infosys and 1% for Wipro. Volumes would be flat for TCS,” Motilal Oswal Securities mentioned in its preview report.
With profit growth lagging behind the topline growth, margins are expected to be under pressure for the IT behemoths. “We expect operating margins of the frontline IT companies to decline by 40-225 basis points (bps) during the quarter on account of a drop in the volume and utilisation rates and appreciation in the rupee against the dollar,” said a Sharekhan report. According to the report, the decline in margins would be partially offset by favourable cross-currency movement and lower variable pay in the wage cost during the quarter.
Infosys is expected to post the sharpest decline in revenue and profits among the top four. Its revenue in rupee terms is likely to drop by 5.2% sequentially, while PAT would fall by nearly 12%. According to a JP Morgan preview report, Infosys may see over a 3% drop in dollar revenue and a decline of 270 bps in operating margin. For TCS and Wipro, sales would drop by 1-2%, while margins would fall by 50-80 bps. Industry trackers would also look for signs of recovery during the results presentation.
Source:
http://economictimes.indiatimes.com/Infotech/ITeS/IT-exporters-to-take-a-knock-o
