Wipro has been resilient during the global economic downturn and has improved profitability by increasing operating efficiency. - We affirmed the
'BBB' long-term corporate credit rating on Wipro. - The positive outlook reflects our view of expected improvement in Wipro's operating performance resulting in free operating cash flow of more than INR50 billion annually in the next two years.

Standard & Poor's Ratings Services today revised its outlook on India-based information technology (IT) service provider Wipro Ltd to positive from stable. At the same time, Standard & Poor's affirmed its 'BBB' long-term corporate credit rating on Wipro.
The outlook revision reflects Wipro's resilience to the global economic crisis and the company's ability to improve its operating performance despite the downturn. "We believe Wipro's operating performance is likely to improve further, resulting in positive free operating cash flows of more than INR50 billion annually in next two years," said Standard & Poor's credit analyst Suzanne Smith.

"We also expect Wipro's revenue, which rose about 6% in the fiscal year ended March 31, 2010, to grow significantly faster in the next two to three years."

The growth will be fuelled by the global economic revival and our expectation that India-based IT service providers such as Wipro will continue to benefit from higher outsourcing because of their cost competitiveness and strong management.

We expect some of Wipro's strategic and operational measures in the IT services business will continue and enable the company to sustain its current operating performance.

That should help offset the pressure from the Indian rupee's strength against the U.S. dollar and the increase in wage costs. Nevertheless, Wipro tries to manage its currency risk by hedging some of its exposure. We believe Wipro will be able to improve its cash flow generation, through better operating performance.

We also expect the company to fund capital expenditure and acquisitions primarily through internal cash resources. This, along with Wipro's policy to consistently maintain a net cash position, supports the company's modest financial risk profile.

We expect Wipro's modest financial risk profile and satisfactory business position to mitigate a reasonable amount of risk stemming from potentially higher inflation in India (BBB-/Stable/A-3) or appreciation in the rupee. This, we believe, results in a material probability that Wipro would be able to service its debt obligations, even if the sovereign comes under severe stress.

S&P rating on Infosys to 'BBB+'; outlook stable

We expect the Indian IT service industry to deliver a robust operating performance. -- We raised the long-term corporate credit rating on Infosys to 'BBB+' from 'BBB'. -- The stable outlook reflects our expectation that Infosys will maintain its robust operating performance and modest financial risk profile.

Standard & Poor's Ratings Services today said that it raised its long-term corporate credit rating on India-based information technology (IT) service provider Infosys Technologies Ltd. (Infosys) to 'BBB+' from 'BBB'.

The outlook is stable. The rating upgrade reflects our expectations of the company's robust operating performance, which we believe will continue to result in strong free operating cash flows.

"We expect Infosys to register a 15% revenue growth, with revenue of more than US$5.5 billion in the fiscal year ending March 31, 2011, as the global economy improves and companies globally further outsource IT functions," said Standard & Poor's credit analyst Suzanne Smith. In addition, we expect growth to continue to be 10%-15% in the next four to five years. We believe Infosys will continue to register more than 30% EBITDA margins in the next two to three years.

However, we expect EBITDA margins to be lower than the 35% registered in fiscal 2010, because of the appreciation of the Indian rupee against the
U.S. dollar and higher wage costs. We believe both these factors will more than offset the benefits of higher employee utilization stemming from higher growth, a better employee mix, and other cost-cutting measures.

"In our opinion, Infosys will continue its strategy of funding growth through internal cash resources. The company has consistently maintained a zero debt position," said Ms. Smith. We expect Infosys' modest financial risk profile and satisfactory business position to mitigate a reasonable amount of risk stemming from a potentially high inflation in India (BBB-/Stable/A-3) or an appreciation in the Indian rupee.

This, we believe, results in a material probability that Infosys would be able to service its obligations, even if the sovereign comes under severe stress.

In our view, Infosys has excellent liquidity. We expect Infosys' liquidity to remain strong, and believe it will be more than sufficient to cover the company's entire debt-like obligations (present value of operating leases). The stable outlook reflects our expectation that Infosys will maintain its robust operating performance and modest financial risk profile.