US slowdown to hit top Indian IT cos

Source: Rediff News-India

April 09, 2007 15:44 IST
Last Updated: April 09, 2007 18:26 IST

The slowdown in the US economy along with domestic factors like service tax on leased and rented premises and imposition of minimum alternate tax may impact revenues and earning growth rates of all major IT companies of India, including Infosys, Satyam, TCS and Wipro.

A report by HSBC Securities along with Capital Markets (India) estimates that revenue and net profit growth rates for eight IT majors will decline in the range of 500-1,500 basis points in 2007-08 since the US remains the largest market for Indian IT services companies, accounting for 60-70 per cent of exports.

In the year 2006, technology/IT spending was only 11 per cent higher than in 2000, with contribution from computer and software services increasing to 40 per cent in 2006 from 36 per cent in 2000 (implying lower volatility).

The share of hardware and communications declined, reducing contribution from volatile sectors. The report also maintains that offshore vendors are growing at a considerably faster pace than their global peers and are gaining market share from incumbents.



Read more: http://inhome.rediff.com/money/2007/apr/09it.htm

This may be an analysis based on what one sees on the surface. However, Indian business owners look at life differently then do their western counterparts.

Te big Indian IT cos have diversified considerably not to be affected by a downturn in any one sector. If you follow the news you may have read that IT Giant WIPRO recently bought a specialised hydraulics unit in Turku in Finland. Why?

They are taught never to put their eggs in a single basket. Indian companies are on a buying spree in Europe, spreading their risks over a wide spectrum of industries.

In addition the international companies are moving to India so not requiring the Indian companies to operate within the unpredictable and troublesome US economy.

In my humble opinion, a downturn in the US economy will only hit a small part of their now diversified portfolios.