Saturday, April 27, 2013

Revisiting IT - beyond the street

Results of top Indian IT companies, with the exception of TCS, have sent shock waves across markets. But rather than worry about them, Indian IT companies must focus on structural reforms for long term advantage

There is a paradoxical advantage that Indian IT firms enjoy in the current situation due to their reliance on overseas (especially developed) markets rather than the domestic economy. They have been through one major crisis in 2008, when most of the domestic demand-dependent India Inc. was rejoicing in our economy’s prized ‘fundamentals’. This time, when the crisis shifts to the EU, one can expect that they are better prepared.

Did they manage to take advantage of precedent? Or have they wasted a good crisis, as the saying goes? Let us first look into the final results of the three IT companies that are a part of the B&E Power 100. TCS, of course, is a clear winner with revenues of $10.17 billion (growth of 24% yoy) and net profits of $2.2 billion (growth of 16% yoy); which places it at 4 in the B&E Power 100 list compared to 7 last year. Infosys reported slower growth with revenues at $6.99 billion (a growth of 15.77% % yoy) and profits at $1.72 billion (a growth of 12.64% yoy; ranked 6 in the B&E Power 100 compared to 11 last year). Wipro’s results were even more modest, as it posted revenues of $5.92 billion (a growth of 13.4% yoy) and net profit of $1.1 billion (a growth of 5% yoy, rank dropped to 18 in the B&E Power 100 from 17 last year).

The real investor challenge these players face is the burden of expectations. Infosys, in particular, is facing the brunt, since its Q4 results showed revenues of $1.77 billion (yoy growth of 10.5%) and a decline of 2% qoq. Furthermore, it gave a very modest guidance of 8-10% revenue growth for the current fiscal, which would underperform


Source : IIPM Editorial, 2013.
An Initiative of IIPM, Malay Chaudhuri
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