Infy brass sees IT still glittering

The senior management of India's second-largest IT services provider Infosys Technologies today insisted that all was well with the company's performance, and the IT sector as a whole.

Infosys CEO and MD S Gopalakrishnan said, "Our margins (the company saw a 2.8 per cent improvement in its operating margins or OPM this quarter) are very good. We see a positive growth for IT services. It appears to be stronger this year than before. We see more opportunities for growth as India continues to be a preferred centre for IT and BPO services in the world. The second quarter was a significant milestone for us as we have seen robust growth in all the business verticals. The generally strong growth seen in the IT services sector is reflected in our performance."

This is generally the company's seasonally best quarter, so it was natural for investors and analysts to expect good results. The company achieved its growth despite the appreciation of the rupee against the dollar (almost 1.5 per cent this quarter). Its hedging stood at $1.4 billion as on September 30, 2007. It further plans to increase its revenue productivity (around 1.9 per cent this quarter). It is also managing to get 3-4 per cent higher billing from new contracts and 2-3 per cent higher billing from existing ones.

Incidentally, the US sub-prime crisis had very little impact on the company. Infosys BPO had four clients in the US mortgage industry and one has stopped working with the company. Meanwhile, Infosys added 48 new clients during the second quarter. It has a total of 520 clients, with over 100 clients from Europe alone. Its top client contributed 7.9 per cent of the revenues this quarter, while its repeat business was 97.7 per cent.

The BFSI segment accounted for 48 per cent of its revenues, while package implementation was 18.7 per cent. Its consulting practice accounted for $241 million or around 5 per cent of its "high-value" revenue. Meanwhile, the US still accounts for 62.7 per cent of the company's revenues. Its European business accounts for around 27 per cent of the revenues.

On the employees' front, the company added 4,530 employees (net) this quarter. The figure was much lower than expected, but the management explained that its Mysore infrastructure was not in place because of which it could not hire almost 3,000 employees. The company still plans to recruit over 30,000 employees in the entire financial year. The attrition figures were higher by 0.5 per cent (14.2 per cent) this year, primarily attributed to employees going in for higher studies.

Incidentally, the management said it was still in talks for a large BT deal (buzz is that the deal size is around $500-600 million). Besides, it has over $1 billion deals in the pipeline. There are 12-14 deals in the pipeline at any given point in time, according to the management, of which, 70 per cent comprise a value of over $100 million.