TCS, Wipro results disappoint

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Mumbai, Bangalore, Oct 22: The combination of a depressed global outlook and weaker rupee has begun to hurt the earnings of India’s IT top league. The country’s largest and third-largest software exporters, TCS and Wipro, respectively, posted flat earnings that lagged analysts’ estimates on Wednesday.

As the rupee plummeted to a record low of 49.50 a dollar on Wednesday, Wipro joined rivals Infosys and Satyam to provide a muted forecast due to deteriorating global economic conditions. Wipro has forecast that its IT services would generate $1.12 billion in revenue this quarter, the same as July-September’s revenues of $1.11 billion.

Earlier, Infosys had revised its dollar revenue growth forecast for the year to 13.1-15.2% from 19-21%. Satyam revised its full-year dollar revenue guidance down to $2.55-2.59 billion, indicating a growth of 19-21% over FY08, compared with the earlier growth target of 24-26%.

TCS reported net earnings of Rs 1,271 crore in the second quarter of FY09, which is a 1.5% increase over the same period in the previous year and a 1.5% decline over the previous quarter of the current fiscal. This is below analysts’ estimated net earnings of around Rs 1,350 crore and the lowest in the past three-and-a-half years.

Similarly, Wipro saw earnings growth decline for a sixth straight quarter. On a standalone basis, it reported a net profit of Rs 852.50 crore, up from Rs 760.30 crore last year. This, again, was lower than the estimated Rs 940 crore.

Last week, research firm Gartner said IT spending would rise only 2.3% in 2009 to hit $3.5 trillion, with businesses cutting back budgets. It had previously forecast that corporate spending on hardware, software, telecommunications goods and technology services would grow 5% next year.

TCS suffered a foreign exchange loss of Rs 260.78 crore in Q2 and Rs 336.08 crore in H1 because of rupee volatility. Wipro, on the on the other hand, recorded a Rs 32-crore forex loss for the second quarter. The TCS management explained that the company had taken hedges at the beginning of the fiscal at Rs 42-43/$ levels and the huge depreciation was a complete turnaround from the situation the previous year.

Going forward, the management has open hedged positions of $1.8 billion and expects rupee volatility to continue. While the TCS management did not directly offer guidance, it indicated that the Citigroup Global Services acquisition would increase scope of work.