 "Rajiv Bansal")
India’s second largest information (IT) technology firm, Infosys today posted strong earnings for July-September, 2013, and shared a positive outlook for the coming quarters.
The Bangalore-based company’s Chief Financial Officer Rajiv Bansal talks to Itika Sharma Punit and Bibhu Ranjan Mishra about his experience through a quarter that threw up unprecedented challenges for finance heads of all Indian exporters, as the rupee depreciated over 11% from a quarter ago.
How hard has your job been in terms of dealing with the extreme volatility in rupee? What is your outlook on the Indian currency?
Honestly, after what happened in the last one quarter, my guess is that nobody can make sense of what will happen on the currency front going forward. I think a lot of the volatility that we saw during the quarter was unprecedented, and was more due to sentiment than fundamentals.
But now I think, some good sense has prevailed and rupee has come back to its normal 61-62 levels. I think the government and the regulator are doing the right things and I would now expect rupee to stabilise at the 61-62 level, unless you see something like the debt ceiling issues.
What was your strategy to deal with the extreme volatility that rupee witnessed during July-September?
With this kind of volatility, where you see 17% intra-quarter movement, one cannot have any strategy. I would actually say that my treasury team did a great job in this kind of a volatile environment.
They minimised the losses; our hedging loss was just $14 million during the quarter. I think our hedging strategy is working very well, and unless the rupee stabilises and we are able to take a long-term view on the rupee, there is no need to change it.
How do you see margins panning out in the seasonally weak October-December quarter?
At this point it is difficult to predict the impact of client shutdowns and furloughs. Since a lot of our revenues are time-and-material linked, every single day does make a huge impact on our growth.
There is going to be some impact, but how much of that is going to impact Infosys is difficult to assess. Clients finalise their definite plans for Christmas and holiday season by November end, and we may have a better picture then.
My expenses in the next quarter are to a certain extent fixed. So our ability to predict margins will depend on our ability to predict growth.
What is the reason that Infosys is focusing on making investments even at the cost of margin expansion?
There are enough and more levers to ensure higher margins, and we can do that. But we believe that we need to make the investments that we are making. Should we shy from making these investments because of what analysts will say about our margins?
The whole idea is that if you want to be around in the long run, and you want to have a sustainable growth, you have to make these investments, and that’s what we are doing now. I am very open to analysts, investors and media.
I am saying that I am not worrying about quarter-to-quarter margin growth. If need be, I will stand up and defend the drop in margins, as long as I know I am investing in the right place.
Now that you have some amount of predictability over the business, would you reconsider resuming quarterly revenue guidance?
Unfortunately we have not been able to predict this for the past two quarters. We wish we were there, but we are not there today. All I can say is that we are doing all the right things, and once the momentum starts picking up--when we see a good order pipeline, when deal wins pick up--I think the predictability will automatically return.
So we are taking care of the basics and the outcome is the predictability. I would still say that Infosys should see at least four-five quarters of sustained growth to actually say predictability is back.
Why the provisioning of $35 million was so pressing in a quarter whereas you could have used this money to improve bottomline?
This has been set aside for something for which we received a subpoena in May 2011, and the discussions are on with the US government agencies and departments for the past two years.
Based on the way the discussions are today, we felt it’s necessary to make the provision. The fact is you have to make certain accounting provisions depending on the situation. We might not use a dollar out of it, or we may spend more on it.
Is it towards settlement of the issue?
Right now the discussions are on, and based on the assessment of the discussions are right now, we have made the provision.
