ET Analysis IT Biggies on Sound Footing in 2nd Qtr The top five may report a 14% jump in revenues and 24.6% rise in net q-o-q due to weaker Re, firm outsourcing demand Source : Economic Times (RANJIT SHINDE ET INTELLIGENCE GROUP) Top five IT exporters listed on the Indian bourses are expected to report robust sales and profit growth for the September 2013 quarter, largely led by a steep decline in the rupee against the dollar during the quarter. Firm outsourcing demand, as indicated by some of the IT firms during analyst conferences, would also come in handy. The ET Intelligence Group estimates over 14% sequential jump in revenues and 24.6% increase in net profit at the aggregate level for top players, including Tata Consultancy Services (TCS), Infosys, Wipro, and HCL Technologies. The prognosis assumes a moderate increase in selling costs and efficient use of foreign exchange hedging by companies. A higher selling expenditure as part of reinvesting profits into the business and a steeper forex loss would adversely impact the prospects. The rupee fell 10-11% on an average against the dollar, euro and pound during the September quarter compared with the previous quarter. While a 1% drop boosts operating margins of top exporters by over 30-35 basis points, the extent of the benefit will depend upon how well companies are able to restrict losses on account of foreign exchange hedging. Revenue growth in dollar terms is expected to be 3-5% for the top-tier players from the quarter ago. TCS, the nation’s largest IT exporter, is likely to report a 4.5% increase in its dollar-denominated revenues from the June 2013 quarter’s $3,307.4 million. This is expected to be better than other top IT exporters. Infosys, the second largest, is likely to retain its last quarter’s tempo and may report a 3% increase in revenues to $2,050.7 million. Wipro and HCL Tech are expected to report a 3% and 4.2% increase in their top lines, respectively. In rupee terms, expect a 13-15% sequential jump in revenues and a 20-30% jump in operating profits. Operating profitability will expand as IT exporters would be able to book higher revenue helped not only by higher dollar-denominated revenues but also by the weaker rupee. At the aggregate level, operating margin is expected to expand by 270 basis points to 26%. TCS may report a 370-basis points sequential increase in the margin, which at 30.7% is expected to be the best among the top-tier IT players. The margin for Infosys may expand by 270 basis points to 26.3% from the quarter ago. Management commentary from these companies will be critical in assessing the demand outlook, especially in the backdrop of the US Federal Reserve’s concerns a few weeks ago over a delayed recovery in the local economy.
Posted on: Thu, 03 Oct 2013 05:31:22 +0000
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