Demand for offshore services likely to progress: Syntel

Syntel Inc, a global information technology services and Knowledge Process Outsourcing (KPO) firm, expects demand for offshore services to continue to progress in 2010.
       
"As we look forward into 2010, we are optimistic that demand for offshore services will continue to progress," Syntel's chairman, Bharat Desai, said here.
       
"We anticipate that our clients' budgets will remain relatively flat in 2010. However, we believe that a larger share of their spending will be allocated to offshore partners. Currently, our clients remain comfortable moving forward with cost-reduction initiatives and are increasingly willing to discuss strategic technology and process-related investments," Desai said.

Syntel has registered a 12 per cent jump in revenue at $117.8 million (Rs 549 crore) in Q4 2009 as compared to $104.7 million (Rs 488 crore) in the prior-year period, and also increased 12 per cent sequentially from $104.7 million (Rs488 crore) in the third-quarter of 2009.

Sequential revenue improvement was driven by broad-based growth across verticals and service offerings, and by approximately $6 million (Rs28 crore) of short-term discretionary project work.
       
During the fourth-quarter, applications outsourcing accounted for 75 per cent of total revenue, with Knowledge Process Outsourcing (KPO) at 17 per cent, e-Business contributing five per cent and TeamSourcing at three per cent.

"Our fourth-quarter financials were indicative of an improving market for offshore services," Desai said.
      
Despite the challenges of a difficult business environment, the company was able to post record revenues, margins, earnings per share and cash in 2009.

"While we expect the demand-environment to improve in 2010, margin pressures will increase. Wage inflation, appreciation in the Indian Rupee and the possible outcomes from a large contract negotiation could all create margin headwinds this year," Desai said.

Syntel will continue to take a long-term view of its business and focus on driving sustainable value for all of our key stakeholders, he said.

Commenting on 2010 guidance, Desai said that based on current visibility levels and an exchange rate assumption of Rs 46 to the US Dollar, the company is providing 2010 guidance of USD 430 million (Rs 1,978 crore) to $460 million (Rs2,116 crore) in revenue, and EPS in the range of $2.15 to $2.45.
       
Syntel's guidance assumes a range of discounts related to its KPO joint venture which would impact both revenue and margins in 2010.

Guidance does not assume that the client will exercise its option to purchase the joint venture, nor does it assume that the contract will continue with the same pricing, terms and conditions and without economic impact to Syntel, Desai said.