IT bellwether Infosys has started the Q3 earnings on a cautious note. HCL Technologies and Tata Consultancy Services followed suit.
Indian IT majors see an opportunity in adversity. They see a potential for growing business in the crisis-hit Euro Zone. At least their December 2011 earnings announcements reflect growth ideas.
IT majors Infosys, HCL Technologies and TCS have met market expectations on profitability and revenue front. However, they also see a weak revenue growth on worsening global conditions and slowdown in corporate decision making.
Customers sourcing IT services from Indian companies are unwilling to spend cash on expansion. A large chunk of the new business comes from companies (clients) expanding into new product areas or geographies worldwide.
Luckily, the rupee fall has cushioned these companies from the adverse economic conditions. Here are three companies that matter in the technology space that announced their performance for the December 2011 quarter so far.
IT bellwether Infosys reported strong numbers for the third quarter ending December 2011. Sales rose 14.8 per cent to Rs 9,298 crore in the third quarter against Rs 8,099 crore in the second quarter ending September 2011.
Profit after tax (PAT) rose 24.4 per cent to Rs 2,372 crore in Q3 against 1,906 crore in Q2.
The company reduced its revenue guidance in dollar terms for the entire year. In response, the stock plunged over 8 per cent on the Bombay Stock Exchange.
A reduction in dollar guidance emanates from macroeconomic headwinds in Europe and the US, from where most IT companies earn a majority of their revenues, and does not augur well for Infy's business.
Analysts were unhappy by the marginal hike in rupee guidance despite 10 per cent depreciation in the rupee.
Most brokerage firms said, a reduction in dollar guidance was disappointing but there have been no downgrades yet.
Credit Suisse said the numbers are good but guidance remains a concern.
IT major HCL Technologies surprised the Street especially with higher than expected profits.
Consolidated revenues shot up 12.8 per cent to Rs 5,245 crore in the second quarter against Rs 4,651.2 crore in the first quarter (QoQ).
Profit after tax (PAT) rose 15.29 per cent to Rs 573 crore against Rs 497 crore (quarter-on-quarter).
Better than expected results pushed the HCL stock up by over 4 per cent to top the Nifty index in early trade.
There is no consensus among brokerages over the results of HCL Tech.
JP Morgan was overweight on the stock citing the dollar revenue growth of 2 per cent.
Religare was positive on the stock saying that Q2 was good with healthy volumes and good margin performance helped by rupee depreciation.
On the other hand, CLSA expects the stock to underperform in the future.
TCS has reported a net profit of Rs 2803 crore, a rise of 21.8 per cent against Rs 2801.44 in the last quarter. The results are in line with expectations.
The drastic slide in the rupee has come as a breather for the Indian IT companies, who have been facing pressures due to macroeconomic uncertainty.
Companies expect the Indian currency to slide further, resulting in better margins in the future.
