It is not quite the Lehman moment yet for India?s $60 billion IT industry. Nonetheless, the litany of headwinds is baffling to say the least?slowdown in the US, the Euro-zone crisis that is now impacting the continent?s strongest economies and large scale unemployment across the developed world and wild currency fluctuations.

Strange as it may seem, the Indian IT industry have weathered the macroeconomic Tsunami ably in the second quarter ended September 2011. Not only that, the top tier companies who have announced results thus far have also indicated a healthy pipeline of deals in the coming quarters. Even though the global economy is volatile, enterprises and their balance sheets are much healthier than it was in 2008-09. It is unlikely there would be budget cuts in FY 12, companies indicated. What happens in FY 13, however, is anybody?s guess.

Companies reported decent volume growth, but TCS and HCL missed street expectations. Infosys has started playing catch up with TCS after lagging in volume growth for over a year now. The management of these firms did pepper their post results commentary with a bit of caution?there is some cause for anxiety because the global markets will take a long time to recover, some customers were not taking decisions on long-term projects while a few were scrutinising IT investments a lot more than usual.

Nevertheless, the bottomline was that everything is fine as of now. For evidence of this optimism, one may not have to look further than the hiring projection of the majors which remains on track. TCS, the biggest recruiter amongst all IT firms, plans to add 60,000 people in FY 12. While, the country?s second-largest IT exporter Infosys plans to hire 45,000 employees by the year end even with the macroeconomic outlook in the US and Europe remaining gloomy. That is an indication of the broader demand environment since the Indian IT industry still follows the simple formula of more people equaling more revenues.

TCS

For the second quarter ended September, the country?s largest IT services exporter posted a sequential rise in net profit to R2,301 crore, a rise of 4.7%,year-on-year net profit were up 6.1%. Analysts feel TCS? numbers were ?modest?, but lower than Street expectations on the revenue front; however, the company outperformed on the operating front. The IT major reported revenue increase to R11,633 crore during the quarter, up 7.7% sequentially, backed by good increase in volume. Year-on-year revenue rose 25.3%, while operating profit grew 11.4% quarter-on-quarter to R 3,143 crore.

?The major highlight of the result was the 6.25% qoq volume growth and addition of two new clients in the $100 million plus revenue bracket. Management has highlighted robust growth outlook for FY12, with the deal pipeline being strong,? noted Angel Broking. EBITDA and EBIT margin increased by 100 basis points (bp) and 94 bp qoq to 29.1% and 27.1%, respectively, backed by rupee depreciation against dollar, which absorbed the negative impact due to promotions given during the quarter. Going forward, TCS expects its margins to increase further.

During the quarter, TCS closed 10 large deals, of which five were from the US, four from Europe and the UK and the rest from emerging economies. The deals span across industry verticals?two in BFSI, two in telecom, one each in retail, hi-tech, life sciences, CPG and travel and hospitality.

The company?s performance during the quarter was backed by strong demand across all industry segments, except for telecom. TCS? anchor industry vertical, BFSI, continued to generate incremental revenue and reported 5.2% qoq growth. The growth in the second quarter was led by the energy and utilities and retail and distribution industry segments, which grew by 18.5% and 9.2% qoq, respectively.

Segments such as travel and hospitality, manufacturing and lifesciences and healthcare also posted strong revenue growth of 7.5%, 7.4% and 6.7% qoq, respectively. Revenue from telecom remained sluggish in Q2. The company indicated that it is witnessing transformation deals in the telecom sector, mainly in emerging economies, and has signed two large deals in the telecom space.

For TCS, growth was across all geographies except India during the quarter. Revenue from developed economies such as US, UK and continental Europe grew by 5.7%, 6.1% and 6.8% qoq, respectively. Emerging economies including Asia Pacific and Middle East and Africa (MEA) posted 7.6% and 4.7% qoq growth in revenue, respectively.

Revenue from India declined by 6.6% qoq, which was a major growth dampener for the company. Even with aggressive hiring plans, management targets to maintain utilisation levels excluding trainees at 82-84% in FY12. Analysts feel TCS is proving to be a beneficiary of its domain-focused approach towards BFSI, as spending momentum is strong in this vertical. ?Even when M&A-related work has tapered off, risk compliance and regulatory work is picking up, which is of a bigger size by quantum. Thus, growth momentum for the company is expected to remain intact,? said Angel Broking.

Infosys

After three straight quarters of lacklustre earnings, Infosys posted a 9.7% jump in net profit year-on-year, riding on better margins on account of a weak rupee and healthy outsourcing contracts. For the September quarter, net profit rose to R1,906 crore from R1,737 crore, a year-ago, while sequentially profits rose 10.7%. Revenue for the IT major jumped 16.6% to R8,099 crore. The company?s top and bottom line numbers were in line with Street expectations. Infosys attributed the turnaround to operational realignment within the organisation and its ability to grow major verticals like BFSI and manufacturing during trying times.

While the firm marked down its full-year dollar revenue guidance by 1%, it significantly revised its full-year EPS outlook upwards. The quarter also saw a huge mark-up in full-year EPS guidance because of the sharp rupee depreciation against the dollar. Infosys expects EPS for FY 12 to be R143.02-145.26, an annual growth of 19.7-21.6%.

?In an economic environment that has deteriorated over CY11, Infosys? holding on to their guidance was a positive surprise. We believe that the management?s consistent commentary about the outlook and deal pipeline skirted deceleration concern in FY12. We continue to see no concern for the growth outlook,? said Shashi Bhushan, analyst with Prabhudas Lilladher.

The company?s EBITDA margin increased by 197 bp to 31.0% as the wage hike impact got absorbed and steep currency movement aided margins. ?The most remarkable development during the quarter was the addition of a client in the $300 million plus revenue bracket for the first time after 4QFY09,? said Angel Broking.

Service wise, revenue from business operations (contributed 60.9% to revenue) grew by 6.1% qoq, majorly led by 14.2% and 11.0% qoq growth in testing services and application development, respectively. Revenue from BPO, application maintenance and IMS posted 4.5%, 1.2% and 2.7% qoq growth, respectively. Revenue from consulting and system integration (contributed 31.2% to revenue) grew by 2.8% qoq, majorly led by 2.4% qoq growth in revenue from consulting and package implementation.

Industry wise, revenue of FSI, the company?s anchor vertical contributing 35.3% to revenue, grew by 4.2% qoq, led by 4.9% qoq growth in revenue from banking and financial services. In the BFSI segment which is facing macroeconomic headwinds, the firm has grown an existing client into a $300-million account. Manufacturing, which contributed 20.2% to revenue, registered 3.5% qoq growth in revenue.

In terms of geographies, revenue growth was led by rest of the world, which posted 7.3% qoq growth in constant currency (CC) terms. Revenue from North America and Europe grew by 6.3% and 2.1% qoq in CC terms, respectively. The company added 10 new clients in Europe during the quarter. Infosys added 45 new clients in Q2, 19 of them in new investment areas such as healthcare, life sciences, energy and utilities.

HCL Technologies

HCL Technologies posted a 50% jump in net profit for the first quarter ended September 30. Profit during the quarter stood at R496.7 crore compared with R331.1 crore in the year ago period. However, sequentially net profit declined 2.7% due to wage hikes. The company?s revenue during the quarter stood at R4,651.3 crore, up 25.4% from R3,708.1 crore during the same period last year.

Analysts pointed out that the company?s revenue growth was led by modest volume growth of 4.0% in core software services and dollar revenue growth of 5.8% qoq in constant currency terms in infrastructure services. ?We continue to see growth both in revenue and earnings. Our revenues grew 5.1% sequentially in constant currency and 25% yoy this quarter, accompanied by operating and net income growth of 38% yoy and 49% yoy respectively. While the currency markets continue to be volatile, we at HCL follow layered hedging programme to cover our foreign currency exposure,? said Anil Chanana, CFO, HCL Technologies.

For HCL Tech, the growth was broad-based, spanning across verticals, geographies and service lines. The IT firm?s anchor industry segments, financial services, contributed 25.1% to revenue and manufacturing contributed 29.0% continued their growth momentum and reported 2.1% and 8.2% qoq growth in revenue, respectively. The retail and consumer product group (CPG) vertical emerged as the company?s primary growth driver, with its revenue growing by 12.0% qoq. In addition, the energy, utilities and public sector (EPU) segment and the media, publishing and entertainment (MPE) segment posted revenue growth of 1.6% and 0.4% qoq, respectively. In terms of geographies, Americas contributed 55.8% to the company?s revenue while Europe?s share stood at 26.6%.

During the quarter, EBITDA and EBIT margins declined by 138 basis points and 120 bp qoq to 17.1% and 14.3%, respectively, because of wage hikes given from July 1, 2011, as well as a decline in utilisation level. HCL Tech enhanced its client pyramid with the addition of 66 new clients. One client was added each in the $40-50 million and $20-30 million revenue brackets. Active client base of the company increased to 480 from 467 in Q4FY11. The company won 12 transformational deals during the quarter. These deals span across all services lines and verticals. Management noted that the company is looking at its biggest deal pipeline in the October-December quarter.

Hiring & Attrition

For TCS, the hiring spree continued, with a whopping gross addition of 20,349 employees and 12,580 net intake, taking its total workforce to 214,770. On a 12-month trailing basis, attrition rates were down to 13.7% from 14.8% in the previous quarter. The management noted that the company?s plan to hire 60,000 people in FY12 was on track. Further, it has given offers to 35,000 campus graduates for FY13.

Infosys maintained its hiring target for FY12. It plans to hire 45,000 employees by the year end even with the macroeconomic outlook in the US and Europe remaining gloomy. It will hire 8,000 people during the third quarter, the company said. For the second-quarter ended September, 30, Infosys made a gross addition of 15,352 people, while net addition stood at 8,262. Of the total addition during the quarter, freshers constituted the major chunk, with laterals at 2,318.

Infosys, which was struggling with its attrition rate in the last few quarters, witnessed a marginal decrease during the September quarter. On a 12-month trailing basis, rates were down to 15.6% compared to 15.8% in the previous quarter and 17.1% in the year ago period. Currently, the company has a total workforce of 1,41,822 employees, 40,000 of which are stationed outside India.

HCL Tech added 9,311 gross employees, of which 6,170 were lateral additions. The company added 3,474 net employees, taking its total employee base to 80,520.