Indian IT firms' revenue to decline in the fourth quarter of FY09

By siliconindia   |   Tuesday, 07 April 2009, 21:54 IST
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New Delhi: The fourth quarter of FY09 may not bring good news to Indian IT firms as project cancellations and delays in clients' decision making may restrict the revenue growth of IT majors in this quarter, thanks to the deepening recession. According to India strategy report of Motilal Oswal, a domestic brokerage firm, Indian vendors have witnessed several project cancellations during the third and fourth quarter of the fiscal year 2009, while the magnitude of project cancellations is different for different vendors. The report foresees that IT companies will report quarter-on-quarter dollar revenue declines owing to stressed volumes and declining realizations. This is the second consecutive quarter where the sector will see dollar revenue degrowth. The rupee has depreciated 4.69 percent against the U.S. dollar during the March quarter, while on an year-on-year basis it has depreciated over 27 percent. "Top-line growth even in rupee terms is expected to remain flat to marginally negative on an organic basis during the quarter," brokerage firm Sharekhan said in its IT earnings preview. Meanwhile, the appreciation of the dollar against other international currencies (euro and pound sterling) would impact the dollar term revenues of the front-line IT firms. "This is likely to have a negative impact of 2-3 percent on the dollar term revenue growth rate as the IT companies bill around 25-30 percent of their revenues in the pound sterling, the euro and Australian dollar," sharekhan report said. India's major IT companies such as Infosys, Wipro, HCL and Tata Consultancy Services will kick-start the quarterly earnings from April 15 onwards. "Forward earnings for most companies are not expected to be good. The earnings for the entire IT sector are expected to be bad and the Infosys results are likely to give a new direction to the market," said Arun Kejriwal, Kejriwal Research and Investment Services.