IT cos upbeat on Q1

MUMBAI: India's top business service firms are likely to see higher revenues in the first quarter, boosted by a falling rupee and sustained offshore business from US clients, analysts say.

They forecast revenues for Indian software firms to grow by between three and 10 per cent in the three months ending June, helped by a weaker rupee.

Infosys, the Bangalore-based pioneer of India's showpiece business process outsourcing sector, kicks-off the earnings season on Friday.

"Infosys and Satyam will meet revenue projections as they had based their quarterly and full-year earnings guidance at 40 (rupees to the dollar), much lower than that prevailing in the quarter," brokerage Religare Securities said in a report.

The average rate for the rupee was 42.8 for the April-June quarter. A stronger dollar benefits India's software companies as they bill most US-based clients in the currency.

The US remains the biggest market for Indian software and service exports, which are forecast by the industry lobby group National Association of Software and Service Companies (Nasscom) to hit $60 billion by 2010.

"The business environment for IT stocks has become slightly favourable than at the beginning of the year," said Bhavin Shah of J P Morgan.

Last year software firms such as TCS, Infosys and Wipro were roiled by the rupee's steepest appreciation against the dollar in three decades, surging wages and proper

"Mathematically speaking, Infosys could increase their full-year earnings guidance by 6-7 per cent," Bhavin said.

"The growth in revenues is being primarily driven by a volume growth, boosted by a seven per cent depreciation in the rupee (against the dollar)," brokerage Sharekhan.com said in a note to clients.

For the January-March quarter Infosys posted a lower-than-expected net profit growth of 9.2 per cent at Rs 12.49 billion (315.04 million dollars), as a US economic slowdown hit clients' budgets.

Software stocks have been volatile this year, but have outperformed the interest rate-sensitive property, automobile and banking sectors, which were hit by several rounds of monetary tightening by India's central bank as it battles 13-year-high inflation.

There is renewed optimism after better-than-expected third-quarter earnings from US-based Accenture.

The global consulting and outsourcing firm said it has not seen any cancellation or big delays in its business due to a weaker US economy and the financial sector.

New bookings for Accenture, a key indicator of future revenues, rose by five per cent at $6.77 billion in the third quarter.

"We expect IT players to witness an increase in offshore volumes going ahead. An early indication of this is seen in Accenture's third-quarter earnings," said Anurag Purohit of Religare Securities.

Indian software exports grew 29 per cent to cross the $40-billion mark in the fiscal year just ended, despite global economic turmoil, Nasscom said.

A recent global survey of top chief investment officers indicates that IT spending could be stronger than expected in 2008.

The survey says that IT spending is set to grow at 8 per cent in the second half of the year, against three per cent same period last year.

Indiatimes.com dt. 11 7 2008