Indian IT companies - are they in doldrums due to Strong Rupee ? Results Watch

The current quarter result snapshot of the top Indian IT companies is as under:
Q 1 - FY 08

• INFOSYS

Net profit : Rs 1079 crore (including tax write back) down 5.68%

consolidated net sales has gone slightly up at Rs 3,773 crore from Rs 3,772 crore

The reported net profit and sales of the company is below its given guidance on the back of weak rupee. (The quarter Q1 revenue guidance of was at around Rs 3,896-3,913 crore and the net profit at Rs 1,005.37 crore).
Operating profit margin has declined to 28.7% compared to 31.7% in the previous quarter.

• WIPRO:

net profit of Rs 726 crore, down 15.2% against Rs 856 crore in the previous quarter.

net revenue was down 3% at Rs 4203 crore versus Rs 4333 QoQ.

its margin dropped by 250 bps sequentially.

• SATYAM COMPUTER SERVICES:

consolidated net profit at 378.3 crore as against Rs 393.6 crore in previous quarter, decline of 3.89%.

net sales stood at Rs 1,830.2 crore versus Rs 1,779 crore up by 2.9%.

Net profit margin slipped to 20.67% from 22.15% QoQ.

• TCS:

consolidated net profit of Rs 1202.9 crore versus Rs 1195.2 crore on QoQ basis as per Indian GAAP.

consolidated revenue was up at Rs 5202.9 crore versus Rs 5162.1 crore on QoQ basis.

Its forex hedge was at $ 2.5 bn.

OUR VIEW VIS-A-VIS OTHERS:

• Seeing all this analysts seem to suggest that the IT dream run may be over atleast in the short term.
• This they say on premise of Rupee getting stronger and making IT exports incompetitive.

But

• The IT industry is on an acquisition spree if rumors are to be believed IT bellweather Infosys Technologies is trying to acquire Capgemini, a consulting company & a IT behemoth.
• The Indian companies are trying to innovate in the business delivery model to decrease their operating costs. Read the new value chain enhancement initiatives which are currently kept under wraps.

The business environment is throwing some unique challenges but also glance through the past & present strength.

Indian Software Brand Message During .com boom & till now in 2006 is:

• A safe destination to do business
• Hassle-free procedural and regulatory environment
• Long-term sustainable competitive advantage in people and infrastructure
• Preeminent destination for cross-border IT services
• Leading global ITES hub for high-value activities
• Strategic product development and R&D base

Now these things also have been added:

• Acquiring higher places in value chain through targeting Consulting Business
• Working on scale economies.
• A greater focus on innovations during these challenging times.
• Fighting rupee appreciation by various sources like hegding etc.

Thus though the future may look gloomy through certain analysts's forecasts there is not much to worry about the long term story.

Still it is the only sector in Indian capital Markets which doubles its returns in around 3 years (Read Infosys). Also they only have performed & given consistent returns in the past.

Though currently they may have their stock prices under pressure they still are the sound bets. Even my personal advice being it is the Right Time to Invest in to them when the prices go down!!! They will surely give better returns in the 1 to 1.5 year horizon. (Reco. by Rishi Kothari)

IN right essence this is a challenge to the it companies to perform better which will take them to newer heights!