Dollar rate up but IT firms' currency woes still unending

Mumbai: As the dollar has appreciated against other currencies including the euro and the pound that account for more than 20 percent of revenues for top-tier IT exporters, IT bellwethers like Infosys Technologies are buckling under the fear of a possibility that dollar revenues may be lower than the guidance projected by them, reported The Economic Times.

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The current situation virtually terminated the joy that the rupee depreciation have brought to IT companies.

A warning note by brokerage CLSA that Infosys may not be able to meet its dollar guidance for the second quarter and the full fiscal sparked the sell-off in IT stocks on Friday, sending the BSE IT index tumbling 5 percent, said dealers. "Infosys is most likely to miss its U.S. dollar revenue guidance for both the September quarter and the full year FY2009. About 28 percent of invoices are denominated in British pound, euro and Australian dollar. The adverse movement of these currencies against the U.S. dollar is creating a 'cross-currency' headwind," the note by the brokerage said. The steep fall shaved Rs 15,000 crore off the constituents of the BSE IT index.

"Prima facie what is mentioned in the note appears to be the reason for the fall. It is frightening that one note can spark off such a collapse," said one Mumbai-based IT analyst. According to the note, Infosys will need to revise its FY09 revenue growth guidance from 19-21 percent to 17-19 percent because of this. The company had given a 6 percent sequential growth guidance for the September 2008 quarter and the CLSA note said Infosys was most likely to miss this as well.

"There has been double-digit dollar appreciation against the pound and Euro. This will obviously lead to lower dollar realization and the dollar guidance could be missed. In rupee terms, this will be offset because of the double digit rupee depreciation," said Harit Shah, analyst with Angel Broking, adding that this was a currency issue and not related to any further drop in demand for IT.

"The street has been expecting that the rupee fall from Rs 42 to Rs 45 (against the dollar) will be very good for IT firms. But what the street has not seen is that rupee has appreciated against the euro and pound, and so has the dollar appreciated against these currencies," said Gaurav Dua, head of research at ShareKhan. Marketmen also attributed the fall partly to standing of CLSA in the market. "We believe that sentiment is upbeat for the IT stocks. Company's 72 percent of the revenue is dollar denominated and therefore this will be revenue neutral," said Deepak Sawhney, head-research, Networth Stock Broking.