This is being seen especially in the BFSI and retail space as the clients are coming in and requesting the company to renegotiate pricing, company officials said during the analyst calls post its announcement of quarterly results.
"There are some sporadic instances when some clients are coming for renegotiation. It is our job to go back and convince them that we will provide them with a higher level of value and they should not renegotiate. Even if they renegotiate, this would be minimum," said S D Shibulal, COO, Infosys Technologies.
He said, in such cases the company was speaking to those clients and was trying to convince them by promising to offer a higher value and a higher level of growth.
The company did not rule out more clients asking it for renegotiation if contracts in a challenging environment like the present. "It is sporadic and happening with the BFSI and retail sector. There is no way to say it is over," he added.
In the first quarter of the current fiscal, Infosys saw a drop in the revenue contribution from its top client to 7.9 per cent from 10.3 per cent in the quarter-ended March 31, 2008. The client, based in Europe, is into telecom and media industry. This resulted in the company's revenue share from Europe coming down from 29.3 per cent a quarter ago to 27.3 per cent now.
The company, however, said this was not a trend in Europe in the telecom space. "We are still very positive about Europe and the telecom space. The overall telecom sector is very positive to us," S Gopalakrishnan, CEO of Infosys said.
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To address the risk of slowdown in growth of business from top clients, the company is putting lot of emphasis on the sales and marketing to add as much number of new client as possible. Gopalakrishnan said the company was pursuing about 12-13 deals of the size of at least $50 million, which are in their different stages of negotiation now.
In the first quarter, except Infosys BPO, most subsidiaries of the company have failed to show a good growth. During the quarter-ended June 30, 2008, while the net profit of most of the subsidiaries dropped further, Infosys Consulting which is still in an investment phase has further increased its losses.
Infosys BPO has recorded a net profit of Rs 33 crore, which is a drop of 17 per cent when compared to the previous quarter's performance. However, the revenue went up 11 per cent to Rs 306 crore, on sequential quarter basis.
Similarly, Infosys Australia's net profit went down by 53 per cent to Rs 14 crore when compared to the previous quarter (Q4, 2007-08). The revenue of the company also dropped marginally by 2 per cent.
Infosys Consulting which is still in an investment phase, increased its losses to Rs 6.3 crore compared to a loss of Rs 15 lakh in the previous quarter. Its revenue however went up by 17 per cent to Rs 74 crore.