IT giants grow faster than smaller cos
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IT giants grow faster than smaller cos

By agencies   |   Tuesday, 22 November 2005, 08:00 Hrs
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BANGALORE: For the second quarter of the current financial year the Information Technology sector has witnessed a reasonable 27 percent growth in sales compared to the same period previous year. The net profit of the sector has grown at a higher rate of 38 percent in the same time.

However, the margins have fallen slightly, owing to a 50 percent increase in staff cost in the past year. Other income for the IT sector increased by a decent 28 percent to $65.45 million, for the quarter of current financial year compared to the same period last year. The aggressive recruitment drive by IT players has led to a 50 percent jump in staff costs.

Leading players have put up a stellar performance in terms of sales as well as net profit. Compared to bigger players like Infosys and Wipro, the growth of smaller players is much lower. While the top four have recorded 10 percent growth in sales for the period under review, against the previous quarter ended 30 June, ’05, the growth of others like MphasiS and Mastek has been lower than 6 percent.

Globally, clients prefer to go to bigger vendors. Further, many mid-rung companies are focused on a particular vertical, which restricts the range of customers that they can target.

The growth seen by TCS, Infosys, Wipro and Satyam has been similar for the quarter ended September ’05. These companies logged sales growth in the range of 9-11 percent for the quarter compared to the June ’05 quarter.

On the other hand, smaller companies like HCL Technologies, MphasiS, Polaris, Mastek and Geometric have grown at 5 percent and below in the second quarter. The profits of the IT sector, which had suffered in the quarter ended June ’05 due to increase in salaries of employees, visa expenses and euro and pound depreciation, have bounced back in the quarter ended September ’05. Infosys has witnessed a 14 percent increase in net profit to $137.72 million for the quarter ended September ’05, compared to a 5 percent fall in the previous quarter.

Similarly, Wipro’s profits jumped by 12 percent in the September ’05 quarter to $108.63 million, after a 1 percent decline to $97.27 million in the previous quarter. MphasiS saw a 19 percent increase in its net profit to $9.09 million for the quarter ended September ’05, after a low growth of 9 percent in the same for the quarter ended June ’05 .

Indian IT companies are undergoing a marked jump in their deal size, on the back of consolidation of IT vendors by companies worldwide. Companies like ABN Amro and GE, which used to outsource work to more than 30 vendors earlier, are reducing the number of vendors. Infosys and TCS have been the direct beneficiaries of the ABM Amro deal. Infosys and TCS stand to gain $140 million and $260 million in revenues from the deal over the next five years, respectively.

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