Rough patch

Mumbai, April 7: Brokerages are taking a bearish view of the infotech sector with just over a week left for Infosys’s fourth quarter results.

Analysts fear that the sector will disappoint, with the quarter showing more volume, pricing and margin pressures, apart from subdued bottomline growth.

The global turmoil has forced many overseas clients to cancel projects and slash their infotech budgets. According to Angel Broking, in some contracts, vendors had to take substantial price cuts of 10-15 per cent and there could be a 1-3 per cent sequential decline in pricing for IT companies in the fourth quarter.

In such a situation, the quarterly numbers of Infosys, which is often the first to be announced, will set the tone for the entire IT sector.

Analysts fear that some companies can even report a sequential decline in their revenues in dollar terms.

“Even in rupee terms, the growth will remain muted as the rupee’s depreciation will add only 2 per cent on an average,’’ says a report by Sharekhan, which expects operating profit margins to decline by 40 basis points to 200 basis points for the front-line IT companies.

Analysts expect Infosys to report an income of Rs 5,726 crore during the fourth quarter of this year. When it declared the third quarter results, Infosys had estimated that income would be between Rs 5,494 crore and Rs 5,699 crore in the fourth quarter.

Infosys is, therefore, expected to beat its own guidance. However, the net sales figure of Rs 5,726 crore is a 1 per cent fall on a sequential basis, though it is a 26 per cent rise over the corresponding quarter last year. The company is expected to report a net profit of Rs 1,580 crore, which is a 26 per cent rise year-on-year.

Analysts feel the focus will be on Infosys’s guidance. Apart from the growth outlook in dollar terms, observers are looking forward to the company’s view on volumes, pricing and IT budgets for the current fiscal.