Infy holds steady despite US jitters, net zips past $1 b

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Infy holds steady despite US jitters, net zips past $1 b

Co Sees Slower Growth In First Two Quarters

THE trendsetter for the Indian IT services industry — Infosys Technologies — has put its trademark caution up front on its future earnings growth. The company said
that it expected sales to rise between 19.2% and 21.1% in 2008-09, with slower growth seen in the first two quarters amid a slowdown in the US.
    "Short-term growth will be slower but for medium-tolong-term, there are significant opportunities," CEO S Gopalakrishnan said after India's second-largest IT services exporter reported a 20.1% rise in consolidated revenues to Rs 16,692 crore for FY08. Net profit was Rs 4,659 crore, rising 20.8%.
    Infosys has now managed to generate a net profit of $1 billion on a revenue of $4 billion. Its cash and cash equivalent reserves now stand at Rs 9,600 crore. As a bonanza for its shareholders, it has recommended a total dividend of Rs 33.25 per share, including a Rs 20 per share special dividend for the profit milestone. The outgo, because of the dividend payout, will be Rs 1,902 crore.
    Infosys said that a survey of its top 100 clients on their IT budgets for 2008 revealed that 76% of them are either showing flat or marginal decline. "There is a tightness in their spending and decision-making cycles are getting longer," COO SD Shibulal said. The company also saw sporadic cancellation of projects, but termed it as nothing significant as it has around 5,000 ongoing projects at any given time. For the quarter ending June 2008, the company has projected income of Rs 4,570-Rs 4,582 crore, a year-on-year rise of 21.1% to 21.4%. Hiring plans show Infy model is robust
    HOWEVER, despite its current size of Rs 16,692 crore and expecting to touch Rs 20,214 crore for FY09, Infosys sees operating margins at almost the current level of around 32%.
    CFO V Balakrishnan said the operating margin is expected to move in a narrow range. This would be significant, given the size of the company and the fact that Infosys' margins are one of the best in the industry.
    Though the revenue outlook for the first quarter remains flat, Infosys has stepped up its hiring numbers. For FY09, it is expecting to hire 25,000 people on a gross basis, which is actually higher than its current revenue growth rate, showing the robustness of its business model.
    However, there have been some painpoints, notably the contribution from its largest business vertical —banking, financial services and insurance — which has come down by 1.7%. The contribution to revenue from its largest client is inching closer to 10%, touching 9.1% for FY08.
    Mr Gopalakrishnan said that BFSI is one of the largest verticals in terms of spending on IT and expects the strong growth to continue as the industry is very resilient.
    At the same time, it is also chasing a few deals in the range of $100-$200 million, though the gestation period for this is expected to be 6-9 months.
    Infosys is also expecting to add newer service lines and newer geographies as means of reducing its dependence on North America.
    For FY08, the revenue contribution from North America stood at 62%, showing a 1.3% drop compared to FY07 while the contribution from Europe increased by 1.7% to touch 28.1%.