The results speak for themselves. After the dark 2002 and not so good 2003, the financial year 2003-04 is showing some promise. With some large orders bagged by companies in the third quarter, sales growth of the sector will continue into the next half of the year. However, margins continue to play spoilsport, especially for mid-sized companies who are now trying to acquire large sized orders at lower-price points to enter the domain of their larger cousins.

Based on the published results of 46 companies, one could say tech sector revival has definitely arrived in India. On a cumulative basis these companies achieved sales of Rs 12,968 crore which is 25% higher as compared to the same period in the previous year. 32 companies showed sales growth while only 14 companies showed a decline in sales. Top 10 companies contributed 78.4% of total sales whereas bottom 10 companies contributed 1.8% indicating the trend of consolidation in the sector. Operating Profits grew by 11% y-o-y while net profit advanced 28% to Rs 2,175.5 crore as compared to the first six months of the previous year. However, the operating margins of these companies cumulatively stood at 21%, down 3% basis points over the same period last year indicating that pricing pressures continue to remain a concern across the sector. While 42 companies showed profits only four companies showed losses indicating the turnaround in the sector. Out of the companies in the sample, 17 companies showed a decline in profits where as 29 showed increase in profits. These numbers are based on both audited and un-audited published results and may be revised by the companies in future.

Wipro
Bangalore-based IT major is No 1 in sales for the first six months of the year. The company achieved sales of Rs 2, 551.1 crore, up 30% compared to comparable sales. Operating Profit Margin (OPM) advanced by 215 basis points and net profit grew by 6% to reach Rs 442.5 crore. The company’s three geographic segments USA, India and the rest of the world contributed 54%, 23% and 22% of the revenues earned during the period. There were 24,265 employees working for the organization as on 30 September 2003 which included 15,773 in the IT services and 8,492 IT enabled services businesses. During the six months of the current fiscal 73 new clients were added to the already existing client base with 30 clients in R& D services and 43 in the enterprise services.

Infosys
The company achieved sales of Rs 2,246.5 crore, 37% higher over the sales in the previous year. The operating profit margin (OPM) advanced by 433 basis points whereas net profit grew by 32% to reach Rs 589.9 crore. The US contributed 74% of the total revenue followed by Europe, India and the rest of the world contributing 18%, 2% and 6% respectively, 51 clients were added during the six months and the company’s top 10 clients contributed 38% of the revenues. The employee strength as on 30 September 2003 was 20,158.

Satyam Computer
The company achieved sales of Rs 1,169.4 crore for the first half of the current fiscal up 7% over the comparable sales. Operating profit for the period amounted to Rs 322.2 crore, 25% higher than last year’s numbers. Net profit jumped by 123% to reach Rs 251.4 crore. In September 2003, Satyam announced the launch of its Offshore Development Center (ODC) in Bangalore to provide high-end product development support to Fujitsu Limited, who is the provider of customer-focused IT and communications solutions in the global market. Income form software services is likely to be Rs 620 crore to Rs 630 crore during the third quarter ending December 2003 and for the fiscal 2004 income is estimated at Rs 2,416 crore to Rs 2,454 crore.

HCL Infosystems
This Shiv Nadar Group company achieved sales of Rs 1,160.9 crore for the first six months of the year, up 38% as compared to sales in the previous year. OPM advanced by 95 basis points to take operating profits to Rs 57.79 crore during the six months of the current year as compared to the same period in the previous year. Net profit leaped by 372% to reach Rs 55.82 crore as compared to the first six months of the previous year. HCL Infosystems recently announced the launch of the HCL Beanstalk Media Center PC specially developed by the company coupling with newly designed interface of Microsoft Windows XP Media Center edition. The company has bagged orders from large corporates like Canara Bank, Asian Paints, Andhra Bank, South Central Railways, Punjab National Bank, ITC (Kolkata) and Assam Electronics Development Corporation Ltd (AMTRON) in the recent past heralding the upswing in the hardware markets as well.

I-flex Solutions
i-flex Solutions, a Citigroup company, reported sales of Rs 370.4 crore for the first six months of the year down 12% as compared to sales in the previous year. OPM declined by 4% to take Operating Profits to Rs 108.5 crore. Similarly net profit declined 23% to reach Rs 88.5 crore as compared to the first six months of the previous year. Such variances can continue for company in the near term. In the meanwhile, the company announced that Asia Fund Services, which is a joint venture between United Overseas Bank, Singapore and Bermuda Trust Singapore Ltd., had selected FLEXCUBE to run its investor servicing operations. This has increased FLEXCUBE’s country presence from 67 to 74 adding Canada, Romania, Serbia, Gabon, Cameroon and Israel.

Moser Baer (India)
Delhi-based optical and magnetic data storage manufacturer reported sales of Rs 668.4 crore for the first six months of the year, 59% over the sales in the previous year. Its operating profits stood at Rs 268 crore up 20% over the same period last year. The operating margins however declined by 10% as the company’s increased capacities are yet to get on stream. The company’s net profit grew by 51% to reach Rs 144.5 crore as compared to the first six months of the previous year. Moser Baer’s success in the highly competitive data storage market and its steady progress in creating a brand in developed markets is indeed worthy of emulation. The company today is one of the world’s largest producers of CD-Roms and continues to expand capacity to remain competitive.

HCL Technologies
The Delhi-based company is no. 5 in sales for the first six months of the year. The company achieved sales of Rs 1,031.8 crore 18% over the sales in the previous year. OPM declined by about 14% whereas net profit grew by 19% to reach Rs 209.8 crore as compared to the first six months of the previous year. Offshore business activities contributed 81% of the total revenue as compared to 19% contributed by business activities on shore. While US contributed 60% of the total revenue earned during the six months of the current fiscal, Europe and Asia Pacific contributed 19% and 21% respectively. HCL Tech has been expanding its services into the enterprise applications arena as well as BPO. The company recently announced that it had secured a framework contract worth up to $ 160 million for its BPO service operations, from British Telecom (BT). The services would be delivered from a ‘Next Generation Contact Centre’ (NGCC) exclusively set up by HCL Tech for BT in Noida.

CMC
The IT company belonging to the Tata stable is ranked # 8 in sales for the first six months of the year. CMC reported sales of Rs 358.60 crore for the first six months of the year up 57% over the sales in the same period of the previous year. Operating profit amounted to Rs 23.2 crore, 15% higher as compared to that in the previous year. Net profit grew by 29% over the previous year figure of Rs 11.8 crore. The company recently has acquired an order Rail Coach Factory, Kapurthala for supply of hardware & software and networking. Guru Gobind Singh University, a new customer in the Education sector placed a multi-crore order for supply of IBM servers and desktops on CMC. The Company is aggressively pursuing the goal to provide one-stop-shop solution to its clients and aided with help from TCS, the company is on the road for a better position in the IT sector in India.

Sushanto Mitra is the founder of Technology Capital Partners
The views reflected here are of the author and not of this publication. No liability is accepted for losses based on the information presented here

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