Indian IT cos upbeat on beating European woes

Riding on the back of a revival in demand in the US market, the Indian IT sector is upbeat about beating the European debt crisis and currency fluctuation, which has hit their first quarter revenue.

The European debt crisis has impacted the size and volume of orders received from the region and coupled with a sharp depreciation in the exchange rate of European currencies against the rupee, Indian IT firms like TCS, Infosys and Wipro witnessed a sequential drop of 1-2 per cent in revenue from the region during Q1, FY2010-11.

Looking at the slow pace of decision-making and the currency issues, Europe will continue to trail behind the US in terms of revenue growth for these companies, say analysts.
    
"The results were impacted by currency fluctuations, especially during May, as well as the ongoing European debt crisis, which hit the margins of companies having exposure to that market," CNI Research CMD Kishore P Ostwal told PTI.
    
However, going ahead, the next quarter results are expected to be healthy on the back of a revival in the US economy and reduced exposure to Europe, he added.
    
Infosys posted a 2.42 per cent decline in net profit to Rs 1,488 crore for the first quarter on account of volatile currency fluctuation.
    
However, for the next quarter (ending September 30), Infy expects its revenue to grow by 22.4-23.7 per cent, translating into a revenue of $1.41-1.42 billion.
    
Even though the numbers were positive for other IT firms, their balance sheets were also impacted by currency volatility and the crisis in the European continent.
    
Posting a 24.25 per cent jump in June quarter profit, TCS had expressed caution about the changing macro dynamics in many markets.
    
Wipro also expressed similar concerns, saying the crisis in Europe and the resultant weakening of currency has been a concern, even though revenues for Indian IT companies are improving on account of the stabilising economy in the US.
    
Its first quarter profit increased by 31 per cent to Rs 1,319 crore. It had also given a revenue guidance for IT services business to be in the range of USD 1.25-1.27 billion in the second quarter.
    
"IT firms are bullish for the next quarter as demand is picking up in the US economy and the consumer demand is growing. A strong order book pipeline and a rise in the volume of the order size is also boosting the sentiments of the IT sector," Angel Broking Research Analyst (IT) Vibha Salvi said.
    
Speaking on the European market, which contributes to 55 per cent of Tech Mahindra's revenues, company CEO Sanjay Kalra had said projects and opportunities were there in the European region, but decision cycles are still slow.