Apr 27, 2007

IT majors sit on growing cash mountain

The top five Indian IT firms have piled up net cash in excess of Rs 20,000cr.
Riding high on a booming economy and growing outsourcing opportunities, the top five Indian information technology players – Tata Consultancy Services, Infosys Technologies, Wipro, Satyam Computer Services and HCL Technologies – have piled up net cash in excess of Rs 20,000 crore.

The net cash figure jumped 31 per cent to Rs 21,148.42 crore in 2006-07 from Rs 16,151.36 crore in the previous year. Analysts estimate the figure to increase by 60 per cent in the current financial year.

The logic lies in the revenue and net profit numbers of these companies. For instance, the total turnover of the five companies for the 2006-07 financial year stands at Rs 57,397 crore — a jump of nearly 40 per cent over last fiscal’s number of Rs 41,033 crore.

If these companies continue growing at this pace, their total income should surpass $20 billion by 2009, even factoring the rupee appreciation and wage inflation, say analysts.

The aggregate net profit of these IT firms increased by around 56 per cent to touch Rs 13,135 crore in the 2007 financial year. Accounting for analyst estimates of the net profit and likely dividend to be given to shareholders in the 2008 financial year, these five firms are expected to have Rs 33,743 crore as net cash – a 59.5 per cent jump over the previous year’s figure.

Sector Outlook : ( Long term Positive )

Due to declining dollar the companies have faced some margin pressure & have taken a blow on their operating margin as well companies like infosys & wipro who have high exposure to US markets are facing tough times & will continue to do so in coming time till dollar weakens.

For investors wait till the markets react to this stocks & buy them on decline in small Quantity for long term.


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