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Mid-cap tech cos to post muted Oct-Dec growth

Tue Jan 13, 2009 12:40pm IST
 
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By Bharghavi Nagaraju

MUMBAI (Reuters) - Indian mid-cap technology firms may report muted growth in the quarter to December due to sluggish demand and falling volumes amid a global slowdown.

The rupee's 3.6 percent fall against the dollar in the quarter will add to revenue, but gains will be limited by the local currency's appreciation against the British pound, another key currency for Indian software firms, analysts said.

"Clients have been enforcing holidays to a much greater extent in the December period. This will definitely impact the volume growth," said an analyst with IIFL, institutional research division of India Infoline.

India's export-oriented software firms are struggling to retain business due to recession in their key markets and global turmoil in the financial sector, a major customer for IT firms.

Mphasis is expected to more than double its net profit on year on a 50 percent revenue rise, while Moser Baer may report an 8.5 percent fall in net profit, a Reuters poll of analysts showed.

"Flat volume growth could be expected across the board. A flat volume growth is a very good number, zero percent volume growth is a good number. I don't think many companies will be able to give that though," the IIFL analyst added.

Shrinking IT budgets, lower billing rates for new projects as well as re-negotiations in existing projects will drag down revenue on a quarter-on-quarter basis, Motilal Oswal said in a research note.

Another negative for software firms in the December quarter is the hedge that some firms have taken against the rupee's rise, which could shave off gains from the currency's decline, hurting profits, analysts added.  Continued...

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