Mid-tier IT cos face Mcap erosion

BANGALORE: With financial investors becoming increasingly wary about the demand for software services in the key markets of the US and Europe, mid-tier Indian tech firms such as MindTree and Sasken are seeing their market capitalisation erode by significant margins.

Bangalore-based semiconductor design company Sasken���s enterprise value stands at $45 million, less than half of its $123 million revenues reported in 2008. Companies with revenues less than $500 million have seen their enterprise value erode more than their bigger rivals such as TCS, Infosys and Wipro.

For instance MindTree, which reported revenues of $189 million, has an enterprise value of $233 million. Meanwhile, bigger firms such as TCS and Infosys have enterprise values more than twice their revenue figures.

According to the Chesapeake Group���s fortnightly data ending October 31, 2008, on technology services, Infosys enjoys an enterprise value of $14 billion on a revenue of $4.6 billion while for TCS, it is $10.4 billion on a revenue of $5.2 billion.

The turbulence in the US economy is having a major impact on the export-driven Indian IT services industry. ���The large IT entities are looking at diversifying into newer geographies and coming out with new services and this puts them at an advantage compared to their smaller brethren,��� says Ambarish Baliga, vice president of Karvy Stock Broking.

The enterprise value for companies with less than $100 million in revenues is almost 0.5x or below of their topline.