Indian tech stocks drop on worries about revenues

By Sumeet Chatterjee

BANGALORE, Sept 12 (Reuters) - Shares in India's top software services firms dropped sharply on Friday, led by Infosys Technologies (INFY.BO: Quote, Profile, Research, Stock Buzz) on worries the dollar's rise against euro and pound could impact the export-driven firms' revenue growth.

At 0817 GMT, shares in Infosys, India's No. 2 software services exporter, were down 5 percent at 1,661.35 rupees, after having fallen as much as 6.2 percent to a one-month low.

Shares in top exporter Tata Consultancy Services (TCS.BO: Quote, Profile, Research, Stock Buzz) were 2.3 percent lower at 816.80 rupees. Third-ranked Wipro (WIPR.BO: Quote, Profile, Research, Stock Buzz) was down 1.6 percent at 420 rupees, and Satyam Computer Services (SATY.BO: Quote, Profile, Research, Stock Buzz) had shed 3.2 percent to 407.80 rupees.

"People are becoming increasingly restless on the back of concerns about pressure on revenue for the software companies," said Tejas Doshi, head of research at Mumbai brokerage Sushil Finance.

"There is no denial to the fact that there is a slowdown in business, and now we will have to wait and see how this currency volatility impacts the numbers of these companies."

Infosys could see its dollar revenues hit by the rise of the U.S. currency against euro and British pound, although the rupee's fall to two-year lows against the dollar would lessen the impact, chief financial officer V. Balakrishnan told Reuters.

But it was too early to speculate about the impact on the dollar revenue guidance of Bangalore-based Infosys, he said.

"The impact on reported dollar numbers could be there ... because other currencies have weakened against the dollar, it could be a lesser dollar number," he said.

UBS analyst Govind Agarwal said the "sharp and sudden" appreciation of the U.S. dollar against the British pound and euro would hit the Indian software services firms' revenue in dollar terms by 1-2 percent in the July-September quarter.

In a report, he said the U.S. dollar has risen 5.5 percent, 13.8 percent and 13 percent respectively against the rupee, pound and euro so far in the current quarter.

In July, Nasdaq-listed Infosys (INFY.O: Quote, Profile, Research, Stock Buzz) said its revenue in dollar terms in the quarter to September would rise by 18.9 percent to 19.9 percent, while growth in the full fiscal year ending in March 2009 was pegged at 19 percent to 21 percent.

Balakrishnan said pound, euro and Australian dollar accounted for about 28 percent of Infosys's revenue.

"Net-net the impact on margins won't be that much, because the rupee has depreciated against the dollar and other currencies have depreciated against the dollar," Balakrishnan said.

"So that will offset some of the impact."

Kotak Securities said while a weaker rupee was positive for the services sector and could help offset pricing pressures, the dollar's appreciation against the pound and euro could hurt dollar revenue growth.

It said Infosys' revenue growth forecast in dollar terms for the fiscal year to March might be impacted by 2 percent to 2.5 percent due to the currency moves.

Indian outsourcing firms are rapidly expanding in Europe, Asia-Pacific and the Middle East to cut dependence on the United States, where business has been hit by the credit crunch and housing downturn.

Still, the United States contributes more than half of the revenue of India's top outsourcing companies. (Editing by John Mair)