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It's now pound that haunts Indian IT
By siliconindia
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Thursday, 17 April 2008, 02:09 IST
New Delhi: The Indian IT companies' attempt to tackle the rupee appreciation by shifting their focus from U.S. to European/UK market has landed them in another trouble - the rise of rupee against these currencies. Analysts say that the rise of the rupee against the pound is expected to adversely impact earnings of IT companies that have a major UK focus, reported The Economic Times.
Companies such as HCL Technologies and Tech Mahindra count British Telecom as a major customer and derive approximately 30 percent and 77 percent of their revenues respectively from the European market, a large part of it from UK. Almost 69 percent of Tech Mahindra?s revenues are from the UK market. HCL does not report separate revenue figures for the UK market.
The pound fell almost 5 percent against the rupee in a matter of few days the quarter of January-March 2008. It was trading at about Rs 81-82 levels against the rupee during the October-December 2007 but fell to about Rs 77 against the rupee during Jan-March 2008. The pound closed at Rs 79.5 on March 31, 2008.
Says Manik Taneja, an analyst with Mumbai based Emkay Research: "We expect (a) higher negative impact in case of HCL Tech on account of a forex cover of $2.3-billion, which should lead to forex losses of $7.2-million as per our calculations. We expect this to impact Tech Mahindra results negatively as well because of Tech Mahindra's exposure to British Telecom."
Though the rupee is likely to appreciate in the long run, in the short term, companies having a European (non-UK) focus stand to benefit as the rupee depreciated against the euro. The euro gained from almost Rs 55.49 during October-December 2007 to Rs 63.09 during the Jan-March 2008. Most Indian IT companies have their presence in east European countries like Hungary, Romania and Czech Republic.