Bangalore: India IT companies can make huge profits by the depreciation of the dollar in the June quarter, with profit margins likely to rise between 2 and 4 percentage points, depending on the extent of their coverage.
Sid Pai, partner at research firm and consultancy Information Services Group, said: "At this point, it may be difficult to estimate the amount of earnings of rupees to each of the companies and their close relation to the size of coverage. We get a sense that for Q1 2012-13, the rupee factor can cause an elevation range of 300 to 400 basis points. "
Jagannadham Thunuguntla, head of research at SMC Global Securities, also said it would be difficult to estimate the net effect of the rupee on margins without having a correct view of the scene coverage. "But companies with high coverage (in the levels of Rs 40) may report an impact on the bottom margin by 1.5 percentage points," he said.
Given the unexpectedly strong decline in the value of the rupee in the quarter, companies with less money under the hedges are likely to get better returns. Infosys was only $ 800 million under the covers, against TCS of $ 3 billion and Aware $ 3.7 billion. Some analysts expect Infosys to get the most from the fall of the rupee, with a 3 to 3.5 percentage point improvement in margins of the June quarter.
The rupee depreciated by 20% in the June quarter. The currency stood at 45 against the dollar between April and June last year, and between 52 and 56 April to June this year. For the quarter ended March, TCS had the highest net profit margin at 26.15%, followed by Infosys and Wipro 25.66% 14.39% in the.
A broker has been speculated that Infosys may be tempted to offer a wage increase on account of rupee bonanza. Some others say it could offer a bonus to its employees. Infosys is the first major Indian IT companies to announce the results of the June quarter, on 12 July.
Sid Pai, partner at research firm and consultancy Information Services Group, said: "At this point, it may be difficult to estimate the amount of earnings of rupees to each of the companies and their close relation to the size of coverage. We get a sense that for Q1 2012-13, the rupee factor can cause an elevation range of 300 to 400 basis points. "
Jagannadham Thunuguntla, head of research at SMC Global Securities, also said it would be difficult to estimate the net effect of the rupee on margins without having a correct view of the scene coverage. "But companies with high coverage (in the levels of Rs 40) may report an impact on the bottom margin by 1.5 percentage points," he said.
Given the unexpectedly strong decline in the value of the rupee in the quarter, companies with less money under the hedges are likely to get better returns. Infosys was only $ 800 million under the covers, against TCS of $ 3 billion and Aware $ 3.7 billion. Some analysts expect Infosys to get the most from the fall of the rupee, with a 3 to 3.5 percentage point improvement in margins of the June quarter.
The rupee depreciated by 20% in the June quarter. The currency stood at 45 against the dollar between April and June last year, and between 52 and 56 April to June this year. For the quarter ended March, TCS had the highest net profit margin at 26.15%, followed by Infosys and Wipro 25.66% 14.39% in the.
A broker has been speculated that Infosys may be tempted to offer a wage increase on account of rupee bonanza. Some others say it could offer a bonus to its employees. Infosys is the first major Indian IT companies to announce the results of the June quarter, on 12 July.
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