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INDIA BUSINESS WORLD - October 1st October 15th 2008
INFOSYS CUTS FORECAST BY $250 M
THE worsening global economic scenario was firmly in print as tech giant Infosys Technologies kicked off India Inc’s crucial second quarter earning season amid tumbling international markets. Despite beating street expectations with quarterly revenue and net profit numbers, India’s second-largest IT services exporter lowered the dollar guidance and remained cautious on the business outlook as US and European financial markets plunged into ‘once-in-a-lifetime’ nightmare.
Though the company maintained the FY09 rupee revenue guidance in the range of Rs 21,309 crore and Rs 21,731 crore, its revenue in dollar terms saw a significant reduction to $4.72-4.81 billion from the earlier projection of $4.97-5.05 billion. This will mean that tech poster boy Infosys, which is used to adding $1 billion annually to the topline, does not hope to do so after three successive years of scorching growth. The company had reported revenues of $4.17 billion in FY08.
Infosys CEO S Gopalakrishnan said, “The environment is challenging and our future guidance is partly due to currency impact and rest due to the economic situation. We are a strong company and our liquidity position continues to be strong.”For the second quarter ended September 30, Infosys reported revenues of Rs 5,418 crore showing a quarter-onquarter (QoQ) growth of 11.6%. Net profit touched Rs 1,432 crore with a QoQ growth of 10%. Both figures were aided by the rapid depreciation of the rupee against the US dollar. On a year-on-year basis, Infosys revenue grew by healthy 32% and net profit by 30.2%.
The cautious outlook has been primarily due to the slowness in decision-making and indifferent ramp-up by existing customers. Mr Gopalakrishnan said deal flow continues to be strong and it bagged five orders in the second quarter with a deal value above $50 million. However, the pricing environment has remained flat.
Infosys also expanded its operating margins by around 3% for the second quarter, primarily due to the rupee’s depreciation and it expects to maintain this level till the end of the fiscal.
Analysts have been nervous about the impact of the Wall Street churn—with large marquee investment banks failing or being taken over following an unprecedented liquidity crunch—on Infosys and its large exposure to the BFSI segment. However, the company clarified that none of its BFSI clients are facing any solvency issues, with most problems centering around contraction in liquidity.
Infosys COO SD Shibulal said: “We do not work with any client in the BFSI segment which have serious problems.” The company expects the current consolidation to throw up business opportunities once the dust settles down.
The BFSI segment grew 2.8% sequentially for the company.
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