India IT Biggies to Post Top-Dollar Sales

Top 4 cos expected to report sequential growth of 4-6% in dollar-denominated revenues

SHRUTI SHARMA & RANJIT SHINDE BANGALORE |MUMBAI 

The top four listed IT companies are expected to report sequential growth of 4-6% in dollar-denominated revenues during the quarter ended June 30, 2011, better than the lukewarm growth of 2-4% in the previous quarter, as demand stays strong in the key markets of Europe and North America. 
The profitability of some companies, including TCS and Infosys, the two largest IT players, could face marginal pressure due to wage hikes, but overall profitability of the sample group of companies is expected to remain intact with some marginal improvement expected from Wipro, as per estimates by ET Intelligence Group. TCS, India's largest software company, and Shiv Nadar-controlled HCL Technologies, the fifth largest, are likely to be the biggest beneficiaries of the IT outsourcing demand. According to ETIG estimates, investors can expect a 5-7% sequential topline growth from these companies during the June quarter. 
Infosys and Wipro, the secondand third-largest IT companies, are likely to experience higher revenue growth than the previous quarter, but may continue to lag behind their peers. 
Infosys, which will kick off the first-quarter results season when it declares its numbers on July 12, is expected to beat the upper end of its guidance. The company has guided for sequential revenue growth between 2.6% and 3.6% in dollar terms. But the average of the estimates of seven brokerages is higher. They predict a 4-5% revenue growth in the June quarter. Wipro may Beat Guidance 
The company is expected to raise its full-year dollar-denominated revenue guidance from 18-20% by 50 basis points. 
TCS is expected to reap the benefits of strong demand, especially in the BFSI segment, with around 6-7% sequential growth while HCL Technologies is likely to clock a similar growth backed by benefit from strong infrastructure spending to see a quarter-on-quarter revenue growth of 6-7% in dollar terms. 
Wipro is expected to beat the upper end of its guidance with a sequential revenue growth of 2-2.5% in dollar terms. Investors would also be keen to gauge the future demand scenario in the backdrop of the uncertainty hanging over the world economy in the wake of the Greece debt crisis, and an apparent weakening of US growth. 
In a report that was widely reported, brokerage firm CLSA spoke of a deceleration in new contracts. The report, which was issued last month, expressed concerns over the growth momentum of top IT players after taking into account the delay in economic recovery in the US and Europe, the major markets for Indian IT companies. These markets contribute over three-fourths of India's IT exports. 
Other industry analysts reckon that demand is likely to remain firm despite the macroeconomic woes of the West. Last week, research firm Gartner said it expects global spendon IT services to grow by 6.6% in 2011, more than twice as fast as in 2010. The firm had earlier predicted 5.6% growth for 2011. 
The views on future demand among sector players are mixed, though. Infosys CEO and MD S Gopalakrishnan was cautious while speaking to ET early last month on discouraging economic data from the West, "The business environment remains volatile with decisions being delayed or postponed frequently. This may impact the IT services business broadly, or by industry, or by customer," he had said. 
But is appears to be business as usual for Wipro. "We haven't heard any concerns during our discussions with customers so far. We also expect sustained demand for our services and continued growth momentum in the coming few quarters," CEO TK Kurien had told ET before the company's silent period. TCS also reiterated its stance of sustained client funding and smooth project ramp-ups in an investor communiqué in June. 
Attrition is likely to remain high for most companies as most of the movement happens during this quarter and employees also leave for further studies. The top four players are trading at P/Es of 18-25 of their FY12 estimated earnings. This fully takes into account the expectations of sustained demand recovery in the quarters to come. Therefore, the valuations of top players are likely to remain range-bound until a major trigger in terms of escalated volume growth coupled with higher billing rates.

‘In India, to do Well, don’t Talk About the Poor’

Jean Drèze, until recently the intellectual driving force behind the National Advisory Council, is measured but unmistakable in his disenchantment with many current UPA welfare schemes. The economist who quit the Sonia Gandhi-led NAC in late June, won't comment on whether the UPA government has failed the NAC. But, he tells Ullekh NP, there's not enough empathy in the Indian establishment for the poor. Programmes like NREGA, he says, attract the hostile attention of both employers and government officials

Why did you not want Sonia Gandhi to extend your membership at the NAC? Has she replied to your letter? 
I had agreed to join the NAC for a limited period of one year. Having done what I had agreed to do, I felt that the time had come to return to other commitments that are closer to my heart. Ms Gandhi has kindly agreed to release me. 
What are your worries about the proposed Food Security Bill which sets aside a huge sum of money for the purpose of "feeding the poor"? 
My main concern is that the proposed framework for the public distribution system (PDS) is confused, impractical and divisive. The whole framework is based on a division of the population into three groups (excluded, general and priority), without any clarity as to how these groups are to be identified. By default, the "priority group" is likely to be equated with the below the poverty line ( BPL) list. This is a major setback, because the NAC's work began with an almost unanimous rejection of the BPL approach. 
Is India's "self-sufficiency" in food production a joke? 
It is not quite a joke, but the apparent selfsufficiency certainly reflects low levels of food intake, in quantitative as well as qualitative terms. For Indians to eat like the Chinese, let alone the Germans or Canadians, there would have to be a lot more food around. For instance, vegetable consumption was recently estimated to be more than twice as high in China as in India, and meat consumption eight times as high. In the age group of 4-6, average nutrient intake as a proportion of the Indian Council of Medical Research's "recommended daily allowance" is only 16% for Vitamin A, 35% for iron and 45% for calcium. 
The Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA; formerly called NREGA) has had many ups and downs in the past five years. What is your assessment of the future prospects? 
NREGA is going through a phase of enhanced vulnerability, when workers' organisations to defend it are yet to be formed, while hostile forces are gaining strength. Among the hostile forces are employers' lobbies, concerned with the rising or allegedly rising cost of labour. In many states, the local administration is also turning hostile, because NREGA means extra work, more accountability, and no easy gravy. In Jharkhand, where there is no concept of government employees doing anything without inducement, I am told that narega marega(NREGA will die) has become a popular slogan in sarkari circles. This happened after the transition to bank payments of wages, when the corruption tap was tightened. Perhaps the greatest vulnerability is the loss of interest on the part of many NREGA workers, due to prolonged delays in wage payments. Of course, millions of people still have a very strong stake in NREGA. But this needs to translate into organised collective power if the programme is to survive and thrive. 
What are you currently working on? Are you pursuing any new interests? 
My current interests are quite enough for a lifetime. But if possible, I would like to contribute to the democratisation of social sciences, including development economics. In my view, the "expert monopoly" of social sciences has done a lot of damage. Fortunately, with the spread of communication facilities and growing possibilities of associational life, a large number of people are getting involved in collective thinking. 
You have famously opposed the creation of Natgrid. What are your major concerns? 
I don't remember opposing Natgrid, let alone "famously" opposing it. But I'm pretty sure that I would oppose it if the details of the project were in the public domain. I am opposed to the concentration of power in general, and of state power in particular. Naturally, this makes me very suspicious of Natgrid, which seems to be part of the move towards permanent state surveillance of all citizens. It is amazing how all the good libertarians who constantly bash the state in the business media watch this without a squeak. 
Is there conspiracy of silence on the part of the government when it comes to implementing pro-poor initiatives? 
There is certainly too little discussion and public debate of poverty and related issues in India. But it is not a conspiracy, and nor is it confined to the government. It is a reflection of the control of democratic institutions by privileged classes. If you want to do well as a minister, or a journalist, or a lawyer, talking about the poor is hardly the way to go. 
How do you rate Poor Economics, by Abhijit Banerjee and Esther Duflo, which has quoted your work quite extensively? 
Judging from the reviews, it seems to be a great book. I am hoping to find out why after reading it.

Jean Drèze 
Born 1959 

• A development economist of Belgian origin 

• An Indian citizen, Drèze has taught economics at institutions like LSE and the Delhi School of Economics 

• Currently visiting Professor at the GB Pant Social Science Institute, Allahabad

• Drafted the original version of the MGNREGA 

• Until recently a member of the National Advisory Council