Same old song

A sense of déjà vu is inevitable for those following the results of IT companies. For the 2nd quarter in a row, Tier-1 Indian IT companies beat the appreciating rupee, posted decent results and yet had their stocks pummelled in the market.

But first, the results bit. India’s largest IT companies, Infosys and TCS, announced robust results. Infosys clocked an impressive 25.2 percent YO-Y rise in third quarter net profits, at Rs 1,231 crore. TCS posted profits of Rs 1,327 crore, up 19 per cent Y-OY. TCS CEO S. Ramadorai said it clocked $4 billion in three quarters— something that took the company a whole financial year last time.

Despite that the markets thumbed down top-line IT stocks. At the time of writing, the Infosys scrip had touched a 52-week low of Rs 1,305, while TCS was not too far from its own 52-week low of Rs 811.25. Macquarie Securities Technology Analyst, Suveer Chainani, says: “The results this time were a non-event. Perhaps the markets are looking for a trigger beyond just good results.” Perhaps a trigger like the extension of a tax holiday beyond 2010—something that seems unlikely as of now. The possibility of a recession in the US, a spillover effect on IT spending in Europe coupled with the ever-appreciating rupee (it appreciated 2 per cent in the last quarter) acting as spoilers. For now, the IT companies are sticking to a ‘wait and watch line’ and flaunting a robust deal pipeline. “There is nothing in the environment from project cancellations or pricing or something like that to panic about…we have been able to sustain momentum,” commented S. Gopalakrishnan, CEO, Infosys. Similarly, TCS which bagged nine large deals during the last quarter, including a $1.2 billion Nielsen deal, says it has several large deals. “We are pursuing 25 deals in the $50-100 million range,” says N. Chandrasekaran, COO, TCS. Dalal Street of course isn’t listening.

— T.V. Mahalingam