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India's Infosys sees profits trimmed by wage hikes

John Ribeiro | July 13, 2010
The global economic environment continues uncertain, the company said

BANGALORE, 13 JULY 2010 - India's second largest outsourcer, Infosys Technologies, reported strong growth in revenue on Tuesday, but profit growth was hit by salary hikes.

Infosys reported revenue of US$1.4 billion for the quarter ended June 30, up by 21 per cent from the same quarter last year. The company's profits grew by 4.2 per cent to $326 million, reflecting increased costs, including a hike in salaries, compared to the year-ago period. Profits declined by 6.6 per cent from the previous quarter.

Europe represented a smaller portion of the company's total revenue, accounting for 20.3 per cent in the quarter compared to 25.7 per cent in the same quarter last year.

Infosys' revenue growth for the quarter in rupee terms was lower, reflecting the volatility in exchange rates. Revenue grew 13.3 per cent in rupee terms in the quarter, while profits fell by 2.4 per cent. A large proportion of the costs of Indian outsourcers are in rupees as most of their facilities and staff are in India.

Infosys said the global economic environment remains uncertain. But with demand for experienced outsourcing staff rising, the company's staff attrition rate rose during the quarter, it added.

A weaker euro and tighter IT budgets in Europe may make the market less attractive for Indian outsourcers, particularly as their costs in India are going up, said Sudin Apte , a principal analyst at Forrester Research, speaking last week.

Business from the U.S. has started to pick up, though it consists mainly of orders that were delayed during the recession, Apte said. But larger orders haven't started to come back, he added.

Indian outsourcers are seeing growth in business compared to last year when business was low, but they are unlikely to reach the 30 per cent revenue growth levels that prevailed before the recession, said Siddharth Pai , a partner at outsourcing consultancy firm Technology Partners International.

Anticipating greater demand for its services in the months ahead, Infosys said its revenue will be more than $1.4 billion during the quarter ended on Sept. 30, representing year-on-year growth of between 22.4 to 23.7 per cent.

For the fiscal year ending March 31, 2011, the company expects consolidated revenue to be in the range of $5.72 billion to $5.81 billion, equivalent to growth of 19 to 21 per cent from the previous year.

 

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