IT firms' worry: Revenues to fall amidst crashing Euro
By siliconindia   |   Monday, 17 May 2010, 22:42 IST   |    3 Comments
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IT firms' worry: Revenues to fall amidst crashing Euro
Mumbai: Economic insecurity and weakening currency in Europe has become a major cause of worry for the India's IT sector, which has just recovered from the fallout of the U.S. slowdown, according to a report by N Shivapriya of Economic Times. Europe is the second largest market for the export-focused Indian IT sector. For firms such as Tech Mahindra, WNS Global Services and Mastek, Europe is the largest market. IT majors like TCS, Infosys and Wipro make 20-25 percent of their revenues in euros and pounds. For most firms, approximately half their Europe region revenue is from the UK, where the billings are in pounds. The euro has slid to its lowest since the Lehman Brothers collapse and while the dollar has strengthened against the euro, it has not strengthened against the rupee to the same extent. Since the beginning of this year, the euro has lost around 13.5 percent against the dollar. Among the large IT firms, HCL Technologies and Tech Mahindra have a higher percentage of revenues from the Europe region as compared to the rest of the industry. HCL Technologies, after the Axon acquisition, gets about 29 percent of its revenues from Europe, and Tech Mahindra, which has British Telecom as its largest client, gets 56 percent of its revenue from the Europe region. Infosys, for instance, earns about 7 percent of revenue in euros and 12-13 percent in pounds. "Nobody would have foreseen that the euro would fall to 1.23. Even the pound has not been doing very well," pointed out an IT analyst with an overseas brokerage. Analysts said that revenue realization would be lower and the weak euro and pound would affect profitability. "There is much uncertainty but the pound has a higher resilience. We've hedged about 50 percent of our net exposure to the pound and to that extent, we are protected," Farid Kazani, Group CFO, Mastek, told Economic Times. About 55 percent of Mastek's receivables are in pounds.

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