Satyam shadow clouds IT firms Q3 results

By Sumeet Chatterjee

BANGALORE (Reuters) - India's top software services firms are expected to report quarterly profit rose by up to a quarter, but the accounting fraud at Satyam Computer Services has further dented prospects in the slowdown-scarred sector.

Analysts said global firms, scared by the revelations of a $1 billion accounting fraud at New York-listed Satyam, might delay giving large contracts as they step up due diligence.

Investors will be alert to companies' comments on any cancellation or delays of contracts, pricing pressures, and hiring prospects.

"While we maintain that over the long-term offshoring will remain a mega trend, in the medium-term the significant headwinds being faced by the companies are unlikely to subside in a hurry," said Harit Shah, a sector analyst with Angel Broking in Mumbai.

Global companies such as Citigroup, ABN AMRO, Nortel and Airbus have outsourced work, taking advantage of India's large pool of English-speaking engineering workers and cheaper wages.

But a recession in the United States, which accounts for more than half of India's total IT revenue, and turmoil in the global financial sector have brought the sector's scorching pace of growth to a grinding halt and battered stocks.

Brokerage Emkay Global Financial expects sector bellwether Infosys Technologies to lower its fiscal year 2008/09 revenue guidance in dollar terms to about $4.70 billion from the company's October forecast of $4.72-$4.81 billion.

Infosys, India's second-largest software services exporter, kicks off the sector's earnings parade on Tuesday, followed by industry leader Tata Consultancy Services on Thursday.