New Delhi: India’s biggest computer services provider, Tata Consultancy Services Ltd, will probably report first-quarter profit growth slowed as a global credit crunch and high energy prices drove overseas customers to delay orders.
Tata Consultancy may say net income rose 4.2% to Rs1,230 crore in the three months that ended on 30 June, according to the median estimate of 13 analysts surveyed by Bloomberg. The Mumbai-based company, which reports earnings on 16 July, posted a 37% profit increase in the year-earlier period.
Infosys Technologies Ltd, the country’s second biggest computer services provider, reported on 11 July profit growth slowed to 21%. The software services company kept its full-year earnings forecast little changed in dollar terms. Chief executive officer S. Gopalakrishnan said “uncertain” global economic conditions may force clients to reduce spending on technology in the short term.
Growth problem? A TCS office in Noida. The company may report slower growth in its June quarter report. (Photo: Harikrishna Katragadda/Mint)
Customers of Indian software makers including Citigroup Inc., UBS AG and Merrill Lynch and Co. Inc. have reported credit losses and writedowns of about $400 billion (Rs17.12 trillion) after the collapse of the US subprime mortgage market.
“The spectre of the credit crisis and record oil prices will haunt the software companies for some time,” said Apurva Shah, head of research of Mumbai-based Prabhudas Lilladher Pvt. Ltd. “The decline in the key operational metrics of Infosys is a sign that things may become worse before they get better.”
India’s computer service sales growth may slow this year because of a slowdown in the US economy, the National Association of Software and Service Companies said last week.
Sales of computer services, including software and back-office operations such as call centres, will probably rise by 21-24% in the year to 31 March, the industry group estimated. Sales increased 28% last year to $52 billion, including $40.4 billion of exports, it said.
India’s biggest software companies earn more than half of their revenue from the US. Infosys generated 63% of sales from North America last quarter, with banking, financial and insurance companies accounting for 35%.
Wipro Ltd, the third biggest, is expected to post a 24% increase in first-quarter profit, according to analyst estimates. Satyam Computer Services Ltd, the nation’s fourth biggest computer services company, may report a 35% gain in first-quarter net income. Satyam and Wipro will announce earnings on 18 July.
Housing Development Finance Corp. Ltd, India’s largest provider of home loans, will report earnings on 16 July. The mortgage lender may report first-quarter profit rose 39% to Rs520 crore, from Rs373 crore a year earlier, according to the median estimate of three analysts surveyed by Bloomberg.
Credit Suisse Group raised its rating on housing development to “outperform” from “neutral”. Disbursements of home loans this year will probably increase by 25%, analyst Aditya Singhania wrote in a note to clients on 9 July.
The mortgage lender, partly owned by Citigroup Inc., aims to woo new home buyers in smaller towns in a nation that may record a housing shortage of 26.5 million units by 2012, according to government estimates.
Housing Development Finance on 1 July raised the rate it charges its best retail customers by 50 basis points after India’s central bank increased interest rates for a second time in June to cool a 13-year-high inflation. Hundred basis points make 1 percentage point.
The nation’s benchmark Sensex index gained 0.1% last week, the measure’s first gain for the five-day trading period in eight weeks, boosted by a drop in oil prices early in the week.
India is Asia’s third largest consumer of oil. Crude oil for August delivery slumped to as low as $135.14 a barrel on the New York Mercantile Exchange on 8 July. Oil surged back to as high as $147.27 a barrel in New York on 11 July.
ACC Ltd, the country’s biggest cement maker, was the best performer in the 30-member index. Hindalco Industries Ltd was second best. India’s largest producer of aluminium led producers of the metal higher on speculation they will raise prices after the biggest smelters in China, the world’s largest producing nation, agreed to cut output by as much as 10%, increasing expectations that a supply glut will ease.
Tata Consultancy Services and Infosys Technologies were the worst performers on the index last week.
India’s government bonds declined for a second week, pushing yields to the highest since 2001, after a government report showed inflation accelerated to the fastest since 1995.
The benchmark notes fell for the tenth day on 11 July, the longest losing streak in at least seven years, as the wholesale- price data raised concern the central bank will soon increase interest rates for the third time this year.
The yield on the 8.24% note due April 2018 rose 30 basis points to 9.45% from a week earlier.
The rupee completed its best week in more than three months on speculation Japan’s third biggest drug maker brought in funds to pay for the acquisition of Ranbaxy Laboratories Ltd, India’s largest drug maker.
The rupee strengthened 0.7% in the week to 42.8725 a dollar as Daiichi Sankyo Co. Ltd converted part of the $4.6 billion it agreed to pay last month to control Ranbaxy.
Parliament will convene a meeting of lawmakers on 21 and 22 July to decide the fate of Prime Minister Manmohan Singh’s government, which last week lost the support of its communist allies over a nuclear energy agreement with the US. Bloomberg