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Home > Business > PTI > Report

BPOs, small cos to bear brunt of Re rise

October 03, 2007 17:49 IST
Last Updated: October 03, 2007 17:51 IST

India's software export target of $60 billion by 2010 will not be revised despite rupee appreciation, but the profitabilities of small IT companies and BPO sector are bound to suffer, Nasscom said on Wednesday.

"There is no need to revise the $60 billion export target by 2010 due to the high rupee appreciation as the top exporters have safeguards to protect their earnings", Nasscom President Kiran Karnik said.

But that does not take away the impact of a nearly 10 per cent rise in the value of rupee in the last seven months on the profitability of the companies, mainly BPOs, small and medium IT companies.

"There will be no impact of the rupee appreciation on the toplines of companies. As far as profitability goes, the impact will be less on the bottomlines of big (top-tier IT comapnies) companies and for small IT companies, the impact will be big as they have little lever to safeguard their earnings due to rupee appreciation through hedging, moving more work onsite", Karnik said.

The industry perception is that there is a 20-30 basis points change in profitability for every one per cent rise in the domestic currency.

The BPO sector would suffer a far more severe impact than the large IT comapnies which get a natural hedge as their work can be done onsite as well. For small, medium companies and BPOs, this does not happen, he said.

Rupee has appreciated by about 10 per cent vis-a-vis dollar over the last two months and the sunrise sector, which
draws most of its revenue from the US market, has a real cause for concern.

Top tier IT exporters -- TCS [Get Quote], Infosys [Get Quote], Wipro [Get Quote], Satyam [Get Quote] and HCL Technologies [Get Quote] have hedged their earnings against the rupee rise.

In the current fiscal, the Indian IT software and services revenues are expected to reach $50 billion mark. Industry recorded a revenue of $39.6 billion in 2006-07 and is projected to grow at 24-27 per cent in 2007-08.

Within the export segment, IT services exports have grown by 35.5 per cent to clock revenues of $18 billion while

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