Slim chance of contract review

With the rupee showing strong volatility, the chances of renegotiating the contracts with clients appear slim for IT major Infosys Technologies. Infosys has long-term contracts, which come up for review annually. "Normally, we get a 2-3 per cent hike in the contract rates on the basis of cost increase. We cannot seek renegotiation of contract rates just on the basis of rupee appreciation.... What if the rupee depreciates some time later? They (clients) may seek a renegotiation of the rates," Infosys CEO and MD S Gopalakrishnan said.

The rupee appreciated 7 per cent against the dollar this quarter. "Our hunch is the rupee could appreciate further in the long-term due to various factors, though it is expected to move in a narrow band in the short-term. All currencies are going to be volatile. Rising crude oil prices, huge capital inflows, especially through ECBs (external commercial borrowings), and uncertainties in the global economy during the financial year will have a cascading effect on the rupee," Infosys CFO V Balakrishnan said.

The company derived a bulk of its revenue from North America (62.6 per cent) followed by Europe (26.8 per cent) for the quarter ended June 30, 2007. "We are also increasingly looking at other markets to reduce the dependence on the US market," Gopalakrishnan said.