IT sector's net jumps 24% in Sept quarter

By siliconindia staff writer   |   Monday, 27 October 2003, 08:00 Hrs
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MUMBAI: A study of 28 software service companies which have reported their results, shows that the industry has witnessed a 28% growth in topline, in the quarter ended September 30, '03 compared to the same period last year. Though smaller companies are witnessing a decline in sales and net profits, the bigger ones are showing rapid growth.

The growth in net profit is also high this quarter at 24% as compared to the corresponding quarter last year. This growth in net profit has taken place despite the rise of the rupee compared to the dollar. Software services companies derive most of their revenues from exports in dollars. Some companies showed a rise in other income due to the hedging gains on dollar earnings.

The sequential comparison of the July-September quarter to the April-June quarter shows a topline growth of 7% and a 8.2% growth in net profit for the industry. This shows that cost rationalisation which some of the leading companies carried out helped their bottomline during the quarter.

Does this mean that the sector is out of the woods as there is growth in both the bottomline and topline? The growth in the topline is due to outsourcing, which is now accepted as a “mega-trend”, with every Fortune 500 company either carrying out outsourcing or considering doing so.

The growth in the bottomline has been achieved due to utilisation of billable staff going up, rationalisation of entry-level salaries, offshore perks being reduced, foreign exchange hedging gains and overall cost rationalisation.

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