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Despite their good performance and so many by other companies, the stock market players have collectively feared erosion in their investments. They had the US recession in mind besides lot many local factors including inflation, sudden correction during January 08. These factors have led to lower than anticipated gains from the IT shares.

What does this mean to these big four?

Let us first look at the numbers as at quarter 4. They stack up as tabulated below

Wipro led the pack with one more outstanding performance (revenue 39% YoY and net profits 11% growth QoQ) on QoQ performance with Satyam finishing second. In the stand alone last quarter comparison Satyam did better than others due to a better price realization. Its volume growth, too, at 18% on YoY or 9% on QoQ basis are far higher than on others. The other IT majors registered volume growth between 2-6 per cent on quarterly basis. Although Wipro's did better in revenue growth, but disappointed when it came to net profit growth figures of a mere 11 per cent (much of the dip, though, struggling with assimilation of overseas acquisition.

TCS posted disappointing erosion in net profit growth. In order to understand these numbers let us further analyze the margins and the market verdict.

Infosys has done well compared to others in terms of profitability growth and employee retention compared to others. Further by announcing that wages will rise between 13-15% in FY 09 Infosys has also ensured good cost to revenue growth model. Further by signing up 24,654 in campus in FY 08 Infosys has also ensured continued supply of quality professional at low wages to give additional growth in FY 08. TCS has done better in recruiting through campus for FY 09 requirement with 22, 451 campus recruits compared to 18, 000 by Infosys. Since the new recruit start delivering 2 quarters after joining and induction will take place by second and third quarters of FY 09 it is unlikely TCS will benefit in the current year significantly. Infosys seem to have factored a possible slow down in the IT market if one looks at the fresh offers at campus. Satyam has also offered to take 14, 000 from the campus making it a significant player.

I continue to favor, in the short run, a frame work of three months, the industry leader, Infosys, as the first choice for investing public. Satyam clearly is the best choice amongst others.

The US economic recession may not affect these companies. The outsourcing has come to stay. This will mean that even in a shrinking economy the IT companies can expand. Their smaller sizes help them. The considerations of the US IT outsourcing of software services or the back office processing is unlikely to change. Further, the rising inflation in India will be accompanied by a currency correction. The US dollar rupee parity is unlikely to be tilted against Indian rupee. This will restore the much needed competitive advantage to the Indian Exporters.

Above all, the quarter 4 results have all demonstrated that when it comes to difficult operating conditions the management processes these companies employ are sturdy to deliver the results.  
What do we do now?

The results are expected to better in quarter 1 of FY 09 for these companies. They have all added substantially to the labor force. Client base and reach have expanded. All of them have started benefiting from the strategic acquisitions, past projects to stabilize their product. They are beginning to get more revenues from consulting and customization. As they move up in the value chain it is easy to beat the recessionary pressures and show good margins on an expanding top line.

Existing investors can stay in Infosys and accumulate moderately. If there is a need to review the sector allocation then cut down on other companies but prefers to add Satyam when you divest other companies. A new investor can consider Satyam as it has proved sustaining of good growth.