Debt Crisis Slows But Does Not Stop Growth For Indian IT Players

According to Gartner, worldwide spending on information technology is projected to grow 4.6% this year. This is the slowest rate at which IT spending has grown over the past three years. The depressed market conditions are driven largely by the debt crisis in Europe. Western Europe’s IT spending is projected to fall 0.7% over the year compared with growth of 3.4% anticipated earlier. Leaders of India’s $76 billion IT outsourcing industry believe that Europe will also impact their growth in the near future. However, despite their concern, these players continue to invest in partnerships, delivery center expansion, and product offerings.

TCS’s Financials
Tata Consultancy Services’ (NSE:TCS) Q3 revenues grew 21% over the year to $2.59 billion. Net Income grew 9% over the year to $568 million. During the quarter, they added nearly 12,000 employees to end with more than 226,750 employees worldwide.

TCS’s Growth Plans
To expand their geographical customer base, the company recently entered into a joint venture with Japanese giant Mitsubishi.  TCS currently gets less than $100 million revenues from Japan. They aim to increase revenues five times more than $500 million over the next four to five years. The $5 million investment by TCS for a 60% share in the joint venture will help in establishing delivery centers focused on offering services to customers in Japan.

TCS’s stock is trading at Rs 1,160 (~$22) after having touched a 52-week high of Rs 1,280.85 (~$24.93) in April 2011.

Infosys’s Financials
Infosys’s (Nasdaq:INFY) Q3 revenues grew 14% over the year to $1.8 billion, ahead of the Street’s projected $1.7 billion. EPS of $0.80 grew 16% over the year and was in line with the market’s expectations. EPS growth was driven by the weak rupee, which helped pull up margins for most outsourcers in the country.

Infosys ended the quarter with more than 145,085 employees, recording a net addition of 3,266 employees for the quarter.

For the current quarter, Infosys projected revenues of $1.8 billion-$1.81 billion with EPS of $0.81. They expect to end the year with revenues of $7.02 billion-$7.03 billion with EPS of $3.00. The year’s revenues are lower than anticipated earlier because of worsening business sentiment in Europe, again driven by the debt crisis.

Infosys’s Expansion Plans
Infosys ended the quarter with a cash balance of $4 billion. They are planning to invest some of this cash toward acquisitions. They are looking actively for acquisitions in Europe where economic conditions are leading to businesses being put up for sale. According to analysts, some company valuations in Europe are as low as they were in 2008, making it an attractive market for potential buyers. Infosys is focusing on German and French markets, which they see as strategic markets for IT spending. They believe that these markets required bigger “front end” presence if an IT player wants to grow, and a merger will give them the right foot in the door.

Meanwhile, back in India, Infosys is working to expand their delivery footprint. They are acquiring land in tier II cities in the states of West Bengal and Gujarat to create newer campuses.

Their stock is trading at $57.65, taking the market capitalization to $32.94 billion. It touched a 52-week high of $74.25 in April 2011.

Wipro’s Financials
Wipro’s (NYSE:WIT) Q3 revenues grew 12% over the year to $1.51 billion. Earnings of $299 million for the quarter were 20% higher than the previous year’s.

During the quarter, they added more than 5,000 employees to end with more than 136,730 employees in IT services. They added 39 new customers for the quarter.

They expect current quarter revenues to be $1.52 billion-$1.55 billion, recording growth of 1%-3% over the year.

Wipro’s Expanding Relationships
To continue to expand their product portfolio, Wipro recently entered into several partnerships. Recently, they tied up with Eucalyptus Systems, a provider of open source on-premise Infrastructure as a Service (IaaS) cloud platform. Through the tie-up, Wipro will be able to offer Eucalyptus’s infrastructure as a service solution as part of their end-to-end enterprise cloud computing offering. Wipro will be responsible for providing solutions, planning, building, and managing scalable cloud services for their customers.

Earlier this quarter, they tied up with Oracle to launch Wipro SprintHR, a cloud-based offering for Oracle’s Fusion Human Capital Management. The SaaS-based offering will help their customers transform HR processes such as talent management, benefits management and core HR administration.

Within the retail sector, they tied up with VendorNet, a leading provider of web-based omni-retailing and supply chain solutions, focused on helping retailers with channel synchronization and giving them a cross-channel view of their inventory. Through the collaboration, the two will provide retailers with a complete view of their sales and fulfillment channels.

Their stock is trading at $10.77, taking market capitalization to $26.38 billion. It touched a 52-week high of $15.39 earlier last year.

HCL Technologies’s Financials
HCL Technologies’s (NSE:HCLTECH) Q2 revenues grew 19% over the year to $1.02 billion. Net income of $112 million grew 26% over the year. During the quarter, they added more than 2,550 employees to end the quarter with more than 83,075 employees worldwide.

HCL’s International Growth
HCL has been reorganizing their international footprint. Recently, they announced plans to shut down their business process outsourcing (BPO) center in their Armagh, Northern Ireland, center and to reduce strength in their Belfast contact center. However, following a recent contract win with Statoil to deliver IT infrastructure monitoring and managing services, the company announced plans to open a delivery center in Norway.

Their stock is trading at Rs. 493.70 (~$9.60) with a market capitalization of $6.67 billion. It touched a 52-week high of Rs. 526.90 (~$10.25) in April 2011.