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India outsourcers see no impact from Nortel

India outsourcers see no impact from Nortel
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First Published: Fri, Jan 16 2009. 11 38 AM IST
Updated: Fri, Jan 16 2009. 11 38 AM IST
Bangalore: Top Indian outsourcers Infosys Technologies and Wipro said on Thursday they did not expect a major impact on revenues from client Nortel Networks Corp’s bankruptcy filing, but their shares fell.
Analysts said that, while Nortel contributed only a small portion of the outsourcers’ revenue, the news dealt another blow to export-driven companies that have seen their growth slow sharply as global economic turmoil has crimped demand.
The industry has also been hit by an accounting scandal at local rival Satyam Computer Services.
“Nortel’s contribution ... is less than half a percent of our yearly revenues, based on the current run rate,” said V Balakrishnan, chief financial officer of Infosys, India’s second-largest software services exporter.
“We do not believe that this will have any material impact on our operations or financial condition,” he said in a statement.
Nortel, North America’s biggest telephone equipment maker, filed for Chapter 11 bankruptcy protection on Wednesday, hoping to save a once high-flying business whose decade-long decline has accelerated with the global economic crisis.
Shares in Infosys, which has a market value of $14.6 billion, ended down 4.1% at Rs1,252.05, after having fallen as much as 6.9%, in a Mumbai market that closed down 3.5%.
No. 3 exporter Wipro fell 3.6% to Rs235.30, having tumbled as much as 10.5%, while sector leader Tata Consultancy Services (TCS) <TCS.BO> dropped 5.3% to Rs510.
Nortel accounts for less than 1.5% of the information technology business revenue for Wipro, the technology unit’s chief financial officer Manish Dugar said in a statement.
Dugar said a substantial portion of the Nortel business was expected to continue, and the amount outstanding from the equipment maker was $15 million, subject to arbitration.
“Wipro is also a partner to Nortel for system integration work in Asia and India, and we expect no impact on our clients,” he said.
TCS officials were not immediately available for comment.
Analysts at JP Morgan wrote in a report that Wipro, with 10% exposure to telecom original equipment makers (OEM), could be hurt more than TCS and Infosys.
“Wipro could see business decline from Nortel, but we would expect the overall impact to be small. For Infosys and TCS, we believe the EPS impact would be even lower,” it said.
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First Published: Fri, Jan 16 2009. 11 38 AM IST
More Topics: Outsourcers | India | Infosys | US | Nortel |