August 8, 2008 For Private Circulation only 1
Earnings Watch for Q1 FY09 of BSE -IT Companies
Sensex 15,168BSE-IT 3,886
Nifty 4,530
Deepak TiwariResearch Analystdeepakt@arthamoney.com T: + 91 22 4063 3111
IT Industry
We have analysed the Q1 results for the BSE-IT companies and our findings can beregrouped as follows:
During Q1 FY 09, Financial Technologies registered 65% yoy growth in netsales at Rs 44 crore followed Mphasis and Satyam that posted 56% and 44%yoy growth at Rs 557 and 2,527 crore respectively during the quarter.
Those companies that reported excellent operating profit growth in the quarterwere Financial Technologies, NIIT, Aptech, Mphasis, Tech Mahindra, Satyamand i-flex. NIIT did a turn around by reporting a PAT of Rs 3.2 crore versus a netloss of Rs 2 crore a year ago.
Poor show was exhibited by HCL Tech, Moser Baer, Patni and TeledataInformatics. Barring Teledata Informatics, other three have reported growth insales.
IT titans TCS and Infosys performed well but Satyam was the one that stole theshow. Satyam registered excellent growth in both sales and profits of over 44%.TCS, Wipro and Infosys contributed 24%, 22% and 21% respectively in the totalrevenues generated by all BSE-IT companies.
Despite a 28% jump in net sales, Wipro’s bottom line was muted thanks to surgein cost of revenues.
Industry saw a 27% growth in net sales but profit growth was marginal.
Outlook for the Industry
Notwithstanding slowing down in developed countries such as the US and Europeancountries and rising cost mounting pressure on bottom lines of companies across sectorsand globe particularly IT firms which are feeling the heat the most. They are lookingforward to new opportunities to de-risk and ramp up their growth plans. Further, we expectthat some companies like Infosys will continue to maintain current margins but at thesame time they will not be able to renew their contracts in their favour consequently wouldnot raise their guidance in US Dollar terms. The Foreign exchange fluctuations will alsolargely have a bearing on their bottom line as well.As S. Gopalakrishnan, CEO and MD avers “Although the global economic environmentcontinues to remain uncertain and could impact IT spending in the short term, we seeseveral opportunities for growth as customers relentlessly focus on improving efficiency”.We believe the IT titans and some mid size companies like Mphasis have enoughresilience to withstand this bad phase.
August 8, 2008 For Private Circulation only 2
Revenue wise top IT playersNet Sales Growth during Q1 FY09 (YoY %)Operating Profit Margins of IT Companies during Q1 FY09
2513.91521245164704.62526.91107.751100.7
0100020003000400050006000
O t h e r s T C S I n f o s y s W i p r o S a t y a m H C L T e c h T e c h M a h i n d r a
-40-20020406080
p t e c h F i a c i a l c - F l x o s e r B a e a
s i s I I a t R o l t a l a t a I f
166520256273128-38
01020304050
T C S I n f o s y s W i p r o S a t y a m H C L T e c h T e c h M a h i n d r a
262728441831
22%18%25%30%16%26%6%26%0%5%10%15%20%25%30%35%
I s t r y t h e r I n f o s y s i r S a t y a L c T e c h a h i n d r a
11%24%21%22%12%5%5%
OthersTCSInfosysWiproSatyamH C L TechTech Mahindra
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