A fairly reasonable growth in dollar revenues of anywhere between 2 and 4.5 per cent sequentially, would probably be the highlight of the September 2009 quarter results form technology firms. Should this materialise, this would be the highest increase in the last five or six quarters.
Companies, like Infosys, have indicated muted revenues while those like Wipro have hinted that revenues may increase beyond 2 per cent, so there could be some positive surprises on the top line front. The reasons are several: to begin with the financial services vertical, to which all big Indian firms have fairly large exposure, is fetching firms a little more business and in other verticals fewer projects are being cancelled than before.
Besides, favourable cross-currency movements — the dollar has depreciated both against the euro and the pound this time around —could chip in with a couple of percentage points. Also, clients in the US and European economies have been able to finalise IT budgets and in the process could have cut back on the number of vendors to the advantage of Indian players.
The performance on the margin front would have been driven by how much companies chose to spend on marketing and sales. While Infosys may see a sequential drop in margins, TCS and Wipro might actually post better operating margins. It’s possible, say analysts, that Infosys may up its guidance to the extent that it suggests a lower decline in revenues or even a slight increase for 2009-10 compared with a drop of 3-5 per cent indicated earlier.
Should that happen, the earnings per share would come in closer to Rs 100 rather than the Rs 94.6-96 that the company had guided. For companies on the whole, while the September quarter may have seen a slight drop in the pricing of contracts, in constant currency terms, the commentary on pricing in the current improving environment would be interesting to listen to.
The revival of the financial sector vertical is key and it would be important to understand how quickly this is happening. Besides, an indicator of how much demand is picking up can be gauged in the recruitment trends; firms such as Wipro , it may be recalled, have been opting to hire just in time. There’s also talk of a mid-term hike in wages, even if it’s for select employees. Should companies announce wage increases across a broader spectrum of employees, the worst might well be over.
