* What: Fiscal Q1 earnings from India's top IT services
firms
* When: From Friday, July 11
* Weaker rupee a help, U.S. financial turmoil to cut orders
By Sumeet Chatterjee
BANGALORE, July 9 (Reuters) - India's top information
technology outsouring companies are set to report quarterly
profit rose by up to a third thanks to a weaker rupee, but
further losses for their major clients, U.S. financial
companies, could lead to falling orders.
Infosys Technologies (INFY.BO) and No. 4 Satyam Computer
Services (SATY.BO) are expected to raise their revenue guidance
for the full-year to March, analysts said, adding they are keen
to see evidence of new deals and their pricing.
Although Indian outsourcing firms are expanding to Europe,
Asia and the Middle East to lower their dependence on the
United States, the country still accounts for roughly half of
their sales.
Morgan Stanley said in a report this month the credit
crisis fallout would extend into 2009, and that mortgage asset
overhangs would drive additional write-downs for Wall Street
firms, such as Citigroup (C.N) and Goldman Sachs (GS.N), as
they struggle to clean up their balance sheets.
"Clients' postponment, cancellation of IT projects,
indecisiveness over IT spending due to uncertainty over global
economic growth remain key concerns," Khandwala Securities said
in note.
Brokerage India Infoline said it had heard some large
banks, financial services and insurance companies were
demanding significant price cuts.
"This, along with low volume growth, manifests a tough
operating environment," it said.
A large pool of English-speaking graduates and
comparatively cheaper wages had helped Indian firms ride an
outsourcing boom for years, but the growth slowed last year
when Wall Street banks issued huge write-downs related to the
subprime crisis and as the U.S. economy lurched towards
recession.
Infosys is expected to report on Friday net profit rose
17.6 percent to 12.7 billion rupees ($295 million) in the
fiscal first quarter ended June from a year earlier, a Reuters
poll of 15 analysts showed.
Tata Consultancy Services (TCS.BO), which reports on July 16,
should post a modest 5.5 percent rise, hurt by its high
dependence on the banking and financial services sector.
India's software and back-office services companies revenue
growth will slow a little to 25 percent in 2008/09, down from
an estimated 29 percent a year earlier, lobby group National
Association of Software and Service Companies has said.
RUPEE HELPS, WAGES BITE
The sector, with annual revenues of $64 billion, offers an
array of services from writing software codes to managing
computer network, back-office operations and processing
financial transactions.
The rupee's 6.8 percent fall against the dollar in the June
quarter has helped offset the effect of large wage increases
and costs related to getting visas for their staff overseas on
margins.
Brokerage Prabhudas Lilladher expects Infosys' margins will
drop 34 basis points and Tata's will dip 17 basis points this
quarter compared to the previous one.
Every 1 percent rise or drop in the rupee impacts the
profit margins of Indian software services firms by 30 to 50
basis points, they said.
"In the short-term, the rupee is likely to further weaken
against the dollar or remain stable given the exacerbation of
both domestic and global negative factors," India Infoline
said.
Shares in Infosys, which the market values at $24 billion,
rose 21 percent in the June quarter and Satyam added 11
percent. The sector index .BSEIT gained 13 percent,
outperforming a 14 percent drop in the main Mumbai index
.BSESN.
NET PROFIT (millions of rupees)
COMPANY MEAN % CHANGE RANGE DATE
Year Qtr
TCS (TCS.BO) 12,510 5.5 -0.4 11,868-13,273 July
16
Infosys (INFY.BO) 12,694 17.6 1.6 12,070-13,380 July
11
Wipro (WIPR.BO) 9,016 26.9 3.0 8,635-9,824 July
18
Satyam (SATY.BO) 5,076 34.2 8.7 4,466-5,595 July
18
MphasiS (MBFL.BO) 690 34.5 -3.4 607-780 n/a
NET SALES (million rupees)
TCS 64,539 24.0 5.9 62,440-66,468
Infosys 48,736 29.2 7.3 48,034-49,403
Wipro 59,521 42.3 6.4 58,257-60,890
Satyam 26,473 44.6 9.6 26,093-26,850
MphasiS 7,135 34.2 8.5 6,937-7,255
NOTE: Estimates for TCS and Wipro are in U.S. GAAP.
Forecasts for Infosys, Satyam and MphasiS are in Indian GAAP.
Estimates are based on 15 forecasts for Tata Consultancy,
Infosys and Satyam, six for Wipro and five for MphasiS.
Poll contributors - CLSA Asia-Pacific Markets, Sharekhan,
Kotak Securities, Motilal Oswal Securities, Religare
Securities, Emkay Global Financial Services, Angel Broking,
Edelweiss Securities, IIFL, Batlivala & Karani Securities,
Khandwala Securities, JM Financial, Prabhudas Lilladher, UBS
and India Infoline.
($1=43.1 rupees)
(Editing by Ranjit Gangadharan and Louise Heavens)
