rediff.com
News APP

NewsApp (Free)

Read news as it happens
Download NewsApp

Available on  gplay

Rediff.com  » Business » Rupee depreciation helps Indian IT companies
This article was first published 12 years ago

Rupee depreciation helps Indian IT companies

Last updated on: January 23, 2012 12:23 IST

Image: Tata Consultancy Services.
Business Standard

The results of the Indian software leaders, Tata Consultancy Services and Infosys Technologies (Cognizant, which is now number three, does not publish comparable Indian GAAP figures), in the last quarter have been boosted by the recent depreciation of the rupee.

But under active policy intervention by the central bank, the rupee has started to rise again.

On present reckoning, the conversion rate used by Infosys for the third-quarter results for the US dollar, Rs 52, is unlikely to rule at the end of this financial year.

So the sharply improved performance may be a bit transient in nature, due to exogenous factors.

...

Rupee depreciation helps Indian IT companies

Image: Recovery from the global financial crisis has been spectacular.

But still, the recovery from the trough created by the global financial crisis is nothing short of spectacular. In the third quarter of 2009-10, Infosys' topline fell by 0.8 per cent.

Precisely two years on, it has grown by 30.8 per cent. Over the same period, TCS' topline growth has transited from 2.9 per cent to 36.8 per cent. Infosys' net margin or profitability has over the same period ranged between 27.6 and 25.5 per cent, touching a low of 23 per cent in between.

TCS', on the other hand, has ranged between 23.8 per cent and the current 21.2 per cent, after touching a high of 25.8 per cent.

...

Tags: TCS

Rupee depreciation helps Indian IT companies

Image: Revenue growth in dollar terms is of course lower, but also respectable.

Thus, come hell or high water, these firms remain robust. In fact, value addition under conditions of depreciation has marginally improved, with the net margin for both the firms during the latest quarter remaining higher than in the previous quarter.

Revenue growth in dollar terms is of course lower, but also respectable.

The robustness of the IT leaders is explained by the fact that they have been able to decouple themselves from some of the ups and downs of the global economy.

Ordinarily, the performance of firms that have high exports will be adversely affected when the global economy is down. The difference for software is that, under conditions of depressed growth, companies across the developed world redouble their efforts to improve efficiency.

...

Tags:

Rupee depreciation helps Indian IT companies

Image: Indian leaders may not be acquiring consulting skills at the pace they would like to.

Explaining his overall optimism, N Chandrasekaran, CEO of TCS, has underlined that technology is a "key resource" for global business to tide over the "current economic climate" and his firm is partnering with them to achieve this objective.

However, two major challenges remain. One is acquiring consulting skills, in which the global incumbents are strong.

The other is the pressure, political and technical, to locate more, and higher paid, staff near the customer, raising costs and affecting margins.

Indian leaders may not be acquiring consulting skills at the pace they would like to.

But given that incumbents are offshoring more and more (this should up their margins) and the challengers are relying less and less on commoditised work (this should lower their margins), the difference in margins between the two remains substantial.

So there is a durability in the performance of India's software leaders which goes well beyond transient favourable exchange rate fluctuations.

Tags: TCS , CEO , India
Source: source