All indications are that India’s information technology (IT) titans would report a slump in revenues for the January-March quarter. They are also likely to miss earnings guidance.

The worsening of the global economic situation has taken a toll on the IT behemoths as expected during the quarter, even as pricing pressures became acute and volumes fell, according to market analysts.

HSBC in its results preview report forecast a 2.5 per cent decline in software industry revenues for the fourth quarter of fiscal year 2009. Brokerage firm Sharekhan said the 1.3-15.2 per cent appreciation of the US dollar against the pound sterling, euro and Australian dollar is likely to have a negative impact of 2-3 per cent on the dollar-term revenue growth rate. Indian IT companies bill around 25-30 per cent of their revenues in the pound sterling, euro and Australian dollar.

“This coupled with the weakening demand environment is likely to keep the dollar-term revenue growth in the negative territory for the frontline IT companies on an organic basis,” the report added.

Motilal Oswal said it saw client budgets lower by 10-15 per cent in calendar year 2009. Although the budgets might provide some indication on the overall demand for IT spend, a cash conservation attitude and chief financial officer-led decision making would call for a relook at budgets going forward, the brokerage firm said.

In terms of profitability, the operating profit margins (OPMs) are expected to decline by 40 basis points to 200 basis points for the frontline IT companies. On the hedging front, Infosys is relatively better placed with a much lower exposure (and conservative mark-to-market accounting policy), the Sherekhan report noted. On the other hand, Tata Consultancy Services is expected to report foreign exchange (forex) losses of around Rs 200 crores because contracts aggregating to $190 million were scheduled to expire during the quarter.

Morgan Stanley said Infosys, which would kickstart the earnings season on April 15, will miss its revenue guidance in dollar terms in the fourth quarter. The second largest software exporter in the country had a guided growth of between 0-4 per cent in constant currency revenues in the past quarter of the fiscal year 2009. This implies a 2-6 per cent decline in its dollar revenues.

The report said Infosys’ fourth quarter guidance could go awry because of the near freeze in new projects in January and February. Going forward, Morgan Stanley is expecting Infosys to clock a 9-12 per cent drop of revenues in fiscal year 2010. Sharekhan was a little more upbeat on Infosys and said the company is expected to just about meet its revenue guidance for the quarter despite the adverse impact of lower volumes resulting from project cancellations, IT budget cuts and slow ramp-ups. Given the global turmoil and uncertainty, the focus would be on the guidance for financial year 2010, said Sharehhan.

Dalal Street is building expectations of close to 5 per cent decline in revenues (in dollar terms) in fiscal year 2010 for Infosys, largely based on the historical gap between the full year guidance of Cognizant Technology Solutions (Cognizant) and Infosys. Cognizant has guidance for at least a 10 per cent revenue growth in calendar year 2009 and traditionally Infosys announces a guidance that is around 10-12 per cent lower than Cognizant’s guidance. In rupee terms, Dalal Street expects a guidance of a flattish growth in revenues, the Sharekhan report added.