Infosys sees silver lining in subprime crisis

Software services provider Infosys Technologies today said that its US clients had assured to increase offshoring.

The company, which has increased its billing rates by 3-4 per cent on new contracts and 2-3 per cent on old ones, said that it could win more business from the US, if the subprime crisis curbed spending there and drove companies to cheaper service providers in other countries.

It would, however, like to change its revenue mix by reducing its dependence on the US, bringing the revenue share down from the current 60 per cent to 50 per cent, while increasing Europe's share from 26 to 30 per cent. The rest of the world would account for 20 per cent of its revenue, compared with 14 per cent now.

The company's earnings forecasts would remain unchanged as its back office unit, which provides services such as call-centre operations, has been largely unaffected by the mortgage crisis.

GreenPoint Mortgage, an arm of financial services company Capital One, which contributed 3-4 per cent of Infosys BPO revenue, had declared bankruptcy on August 20.

"We have not seen any slowdown in terms of number of deals or any such thing from the US yet. Even when companies are looking to cut costs, the offshoring model makes sense," S Gopalakrishnan, the company's chief executive, told reporters in Mumbai.

The company's exposure to the subprime and mortgage industry is about 0.5 per cent. Infosys has four customers from the banking vertical, which have some exposure in the mortgage space.

"The impact of the subprime crisis will be close to a $1 million this year. But we feel that large companies can absorb such losses better than the smaller companies," said Gopalakrishnan.

He said the business environment was more positive in Europe than in the US. "They (Europeans) have woken up to the fact that they need to become more aggressive in leveraging this globalisation phenomenon."

While pointing to talent shortage as the biggest challenge facing the information technology and other sectors, especially retail, telecoms and infrastructure, he said the rapidly appreciating rupee also posed a serious problem.

Infosys shares have fallen 5 per cent in the past three months against a 2.8 per cent gain for the Sensitive Index of the Bombay Stock Exchange.