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Infotech set to log healthy growth

india Updated: Jul 09, 2008 21:44 IST
Venkatesh Ganesh
Venkatesh Ganesh
Hindustan Times
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Inflation and higher oil prices may have hit the economy, but the information technology sector, which is export-driven, seems poised to post a healthy growth.

Analysts feel that IT companies, led by Tata Consultancy Services (TCS) and Infosys Technologies are expected to post higher growth for the April-June quarter. Infosys will announce its first quarter results on July 11.

IT companies are expected to post 6-11 per cent growth in revenues compared to the previous quarter, as the value of the rupee has come down by nearly 4.7 per cent since April, 2008, say analysts. Exporters gain when the rupee weakens against other currencies. Profits, however, are likely to be flat—or even lower in a few cases—due to hedging losses.

Mumbai-based institutional brokerage firm Emkay Global Financial Services has projected a sectoral revenue growth of 5.9 per cent for the quarter. Another brokerage firm, Sharekhan, is even more optimistic with a 6.50-11 per cent profit forecast for the next three quarters.

Infosys is expected to increase its revenue guidance for the year by 5-7 per cent due to gains in forex earnings. TCS does not issue any guidance.

HCL Infosystems and Wipro Technologies are expected to post losses on their forex hedging. The two companies had increased the amount of export earnings they hedged in the last quarter, when the rupee appreciated against the dollar.

Tech stocks have considerably outperformed the benchmark indices during the period April 2008-June 2008. “This is mainly due to the rupee depreciation, the better-than-expected guidance by IT companies and extension of tax holiday period till 2009,” said Manik Taneja, IT analyst, Emkay Research.

There are other critical factors that concern the market. Infosys and TCS are expected to hike wages of their 2-lakh-strong workforce. Then there is the issue of visa costs. “The margins of frontline IT companies during the first quarter of the fiscal are generally dented by visa cost,” says Taneja.