IT Industry

Earnings Watch for Q1 FY09 of BSE -IT Companies

We have analysed the Q1 results for the BSE-IT companies and our findings can be
Sensex 15,168 regrouped as follows:

BSE-IT 3,886  During Q1 FY 09, Financial Technologies registered 65% yoy growth in net
sales 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 quarter
were Financial Technologies, NIIT, Aptech, Mphasis, Tech Mahindra, Satyam
and i-flex. NIIT did a turn around by reporting a PAT of Rs 3.2 crore versus a net
loss of Rs 2 crore a year ago.

 Poor show was exhibited by HCL Tech, Moser Baer, Patni and Teledata
Informatics. Barring Teledata Informatics, other three have reported growth in
sales.

 IT titans TCS and Infosys performed well but Satyam was the one that stole the
Nifty 4,530 show. Satyam registered excellent growth in both sales and profits of over 44%.
TCS, Wipro and Infosys contributed 24%, 22% and 21% respectively in the total
revenues generated by all BSE-IT companies.

 Despite a 28% jump in net sales, Wipro’s bottom line was muted thanks to surge
in 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 European

countries and rising cost mounting pressure on bottom lines of companies across sectors
and globe particularly IT firms which are feeling the heat the most. They are looking
forward to new opportunities to de-risk and ramp up their growth plans. Further, we expect
that some companies like Infosys will continue to maintain current margins but at the
same time they will not be able to renew their contracts in their favour consequently would
not raise their guidance in US Dollar terms. The Foreign exchange fluctuations will also
largely have a bearing on their bottom line as well.

As S. Gopalakrishnan, CEO and MD avers “Although the global economic environment

continues to remain uncertain and could impact IT spending in the short term, we see
several opportunities for growth as customers relentlessly focus on improving efficiency”.
We believe the IT titans and some mid size companies like Mphasis have enough
resilience to withstand this bad phase.

Deepak Tiwari
Research Analyst

deepakt@arthamoney.com

T: + 91 22 4063 3111

August 8, 2008 For Private Circulation only 1

Revenue wise top IT players

Others TCS Infosys 6000

5212
Wipro Satyam H C L Tech 5000 4704.6
4516
Tech Mahindra
4000
2513.91
3000 2526.9
5% 5% 1100.7
2000
11% 1107.75
12% 1000
24%
22% 0

Wipro

Satyam
TCS
Others

H C L Tech

Tech Mahindra
Infosys
21%

Net Sales Growth during Q1 FY09 (YoY %)

80 65 50 44
56
60 40
28 31
26 27
40 27 31 28 -38 30
16 20 18
20
20 2
10
0
0
Rolta
Mphasis

Teledata Info
Financial Tech

Moser Baer

NIIT
I-Flex
Aptech

Patni

-20
TCS

H C L Tech
Infosys

Wipro

Satyam

Tech Mahindra
-40

Operating Profit Margins of IT Companies during Q1 FY09

35% 30%
30% 25% 26% 26%
22%
25% 18% 16%
20%
15%
10% 6%
5%
0%
Others

Wipro
Industry

Satyam
TCS

H C L Tech

Tech Mahindra
Infosys

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PBIDT Growth during Q1 FY09 (YoY %) Net Profit Growth during Q1 FY09 (YoY %)

100 60 48 48
43 49 40
50 30 23
22 -81 -71 12 -103
6 10 20 -19
-1 2
0 0

Mahindra
Industry

Others

TCS

Wipro

Satyam

H C L Tech

Others

Wipro
Satyam
Industry

H C L Tech
Tech Mahindra
Infosys

TCS
Infosys
-20

Tech
-50
-40
-100 -60
-80
-100
-120

Quarterly Performance: A snap shots of BSE-IT Companies.

Standalone Q1 FY09 results YoY % Growth

30 day Operating Net Net

Rs. Crore CMP returns (%) PE Net sales PBDIT Profits Profits OPM sales PBDIT PAT
Industry 18.22 21681.86 5821.9 4835.38 4113.86 22% 27 6 2
Smaller players
Aptech 231.35 10.95 446.52 27.86 6.73 6.08 2.78 22% 16 62 65
Financial Tech 1402.85 -25.24 6.15 44 219.14 9.11 169.87 21% 65 168 179
I-Flex 1345.85 -7.78 25.97 462.8 110.02 60.96 92.18 13% 20 43 58
-
Moser Baer 100.9 -11.49 -7.06 478.93 57.84 35.5 -108.37 7% 2 -65 1178
Mphasis 226.85 10.66 17.9 556.64 109.61 106.87 77.96 19% 56 60 60
NIIT 90.35 -5.24 40.61 120.61 15.66 12.09 3.16 10% 27 67 254
Patni 230 -3 9.69 366.69 129.48 71.17 85.62 19% 31 -23 -21
Rolta 299.1 7.37 20.26 219.45 108.29 108.29 54.78 49% 28 23 4
Teledata Info 6.55 1.58 236.93 47.96 37.09 42.95 16% -38 -64 -59
Bigger players
TCS 842.55 3.36 18.71 5212 1497.14 1282.45 1099.2 25% 26 10 12
Infosys 1679.85 -0.84 20.37 4516 1566 1344 1231 30% 27 22 23
Wipro 437.7 6.86 21.43 4704.6 872.7 769.9 546 16% 28 -1 -19
Satyam 409 -10.91 13.99 2526.9 678.23 648.61 575.91 26% 44 43 48
H C L Tech 224.75 -5.54 18.79 1107.75 96.71 61.9 -13.54 6% 18 -81 -103

Tech Mahindra 794.45 9.91 10.88 1100.7 306.39 281.36 254.36 26% 31 49 48
Source: Prowess, Artha Money Research NB: All figures have been taken on standalone basis.

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