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US Financial to Impact Indian IT

September 19, 2008

The IT spending in US Financial companies is likely to see a drop of 4% YoY [Dec-08] This contraction will continue for at least a year and the turnaround could happen only by 2010. Volumes for India IT companies are likely to be severely affected in F2010, although too uncertain to estimate as of now.

Even in the best case for Indian IT companies if the spending is unlikely to be cut down, due to collapse and M&A activities, BSFI segment will easily contract by 2-3%. The business environment has deteriorated considerably faster than what the street may have expected.

Ahead of th results, Analysts expect Infosys to lower its F2009 organic USD revenue guidance by ~2.5% to at least US$4,850mn in the worst case (vs. current guidance of US$4,970-5,050mn). Likewise, Satyam may also lower its F2009 USD revenue guidance to US$2,600mn (21.5% YoY revenue growth) from current guidance of 24-26% YoY revenue growth.

With 10% depreciation of the INR, IT companies are likely to stay on target for their earnings in Rupee terms.

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