Infosys unlikely to be hit by Re rise

Even as Infosys Technologies readies itself to declare its first quarter results for 2007-08, analysts believe the rupee appreciation may not severely impact the $3 billion IT major. The optimism is reflected on the bourses too "� all IT stocks appreciated by around 4 per cent over the last three days.

P-Sec analysts are revising their rupee-dollar assumption to 42.5 for FY08 and FY09 estimates. They expect Infosys to post operating revenues of Rs 3,931 crore "� quarter-on-quarter (q-o-q) growth of 4.22 per cent and year-on-year (y-o-y) growth of 30.4 per cent. However in dollar terms, they estimate revenues of $925 million (7.2 per cent q-o-q, 40.2 per cent y-o-y). 

HIGH ON HOPE Infosys Technologies: Q1 expectations
Rs crore	Revenue	% chg	Net profit	% chg
CLSA	3824.30	26.80	1002.70	25.30
Edelweiss	3830.40	27.50	975.90	22.90
JP Morgan	3884.10	28.90	965.00	21.30
Karvy	3852.20	27.90	981.14	22.30
Pranav Securities	3931.30	30.40	1001.70	25.70
Infosys guidance	3896-3913	29.80	1001.69	24.20

They expect a q-o-q margin erosion of 244 basis points this quarter, reflecting the impact of the rupee appreciation. On a weighted-average basis, the rupee has appreciated by 5.73 per cent and 5.82 per cent on an average and on a reporting day basis respectively. Infosys had a cover of $470 million marked to the market at Rs 43.10 (March 31, 2007, rate), which it later upped to $1,000 million.

Moreover, the Infosys management does not factor in pricing improvement in its guidance, and this could emerge as a potential upside risk to its expectations.

Taking a longer-term view, ABN Amro analysts too now project 23.6 per cent CAGR in rupee revenues (30.3 per cent CAGR in dollar terms) and a 21.9 per cent CAGR in profit after tax (PAT "� pre-extraordinaries) over FY07-10.

Infosys' client mining and rationalisation have improved. Its revenue per active client was up 32 per cent for FY07. Utilisation headroom of 5-7 per cent over the fourth quarter of 2006-07 level is another margin lever, the analysts note.

Offshore wage hikes of 15 per cent are in line with the last year's level. Salaries of freshers too are likely to see a 10 per cent annual increase. However, the increased hiring of non-engineers should partly offset this.