Friday December 7, 09:15 PM
Infosys: little impact from U.S. slowdown |
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By Dhanya Ann Thoppil
BANGALORE (Reuters) - Infosys Technologies, India's second-largest software services exporter, sees little impact from the U.S. economic slowdown as it was able to add new clients in the financial services sector, its chief executive said.
Indian software services companies typically get more than half of their revenue from the United States and some have feared that the downturn in the world's largest economy would hurt the outsourcing industry.
"To date, we have not seen any impact which cannot be managed -- in the sense that there is a small impact, but it is getting replaced with new business and new opportunities," S. Gopalakrishnan said at the Reuters India Investment Summit on Friday.
Along with the client additions, the company has even managed to get small rate increases, in some cases over the last month, he said.
"Early indications and my own reading is that like in 2001, the offshore IT services business should continue to grow," Gopalakrishnan said, adding the company needs to wait until early next year, when the budgets are set, to get a better feel.
He expects IT budgets of U.S. clients to be flat to lower for 2008, with any cut being in the 2 percent to 3 percent range, but said the company would still be able to maintain higher prices as its customers are willing to pay more.
Infosys also plans to continue growing its banking, financial services and insurance (BFSI) segment, which comprises 37 percent of its total revenue, despite the credit crisis in the United States.
"We are not taking any initiatives to reduce our exposure to this (segment) because we have significant opportunities, presence and investments, and clients continue to spend," he said.
RUPEE & MARGINS
Business, however, could be affected if the rupee continues to appreciate at a rapid pace.
"The pace of the appreciation is actually a bigger issue than the appreciation itself," Gopalakrishnan said, adding that he sees the company's fiscal 2008 margins moving in a narrow band of 50 to 100 basis points, provided the currency's acceleration is moderated.
The rupee , which is up more than 12 percent against the dollar so far this year, has become a constant source of worry for the software services sector.
Despite a sharp appreciation of the rupee against the U.S. dollar over the last few years, Infosys has so far managed to grow its business and maintain margins by expanding its geographical presence and solution offerings.
Gopalakrishnan expects the rupee to be volatile in the short term, and probably appreciate in the medium to long term.
OUTLOOK UNCHANGED
He also backed Infosys' earnings and revenue forecast for fiscal 2008. In October, the company said it expected full-year earnings of 79.49 rupees to 79.88 rupees a share on revenue of 165.88 billion rupees to 166.48 billion rupees.
Excluding items, the company forecast earnings of 78.60 rupees to 78.99 rupees a share.
Analysts on average expect a profit of 80.50 rupees a share, on revenue of 169.08 billion rupees, according to Reuters Estimates.
Shares in Infosys closed up more than 5 percent at 1718.15 rupees Friday on the Mumbai market, which closed up 0.86 percent.
The stock has fallen more than 25 percent this year, sharply underperforming a 43 percent rise in the main index.
WAR FOR TALENT
Gopalakrishnan admitted that there is a global shortage of talent. He said talent is going to be the number one issue for any company today to scale up, grow or even to sustain its position in the market.
"War for talent is what's going to decide the fate of companies."
(Additional reporting by Hezron Selvi, Shikhar Balwani in Bangalore)
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