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Infosys sees growth slowing down to 30% this fiscal

Fakir Chand in Bangalore

It's now official! The meltdown in the US economy and the attrition in the growth rates of its tech sector have not spared even Infosys Technologies, the Nasdaq-listed Indian software company, from maintaining the kind of phenomenal (read reckless) growth rates of above 100 per cent it had posted over the last several quarters, or since the tech boom in the Silicon Valley during the late nineties.

In a candid admission on the direct fallout of the ongoing turbulence in the US economy, Infosys CEO and Chairman N R Narayana Murthy disclosed in Bangalore on Wednesday that the total income expected at the end of the current financial year (2001-02) would be around Rs 25.60 billion. This would be only 30 per cent higher than Rs 19.60 billion that the global IT company had earned in the just-concluded fiscal year 2000-01.

In stark contrast to the phenomenal growth rate of 112.70 per cent registered by Infosys for 2000-01, the projected revenue for the current fiscal year (2001-02) will result in a steep fall of over 70 per cent in its growth rate on annual basis.

Undeterred by the downward revenue projections made for this fiscal, Murthy claimed that the net earnings per share at the end of March 31, 2002, was expected to be between Rs 118 and Rs 121, which would be much higher than the net EPS of Rs 95.06 achieved at the end of March 31, 2001, and as against Rs 44.38 earned in the financial year 1999-2000.

Similarly, Infosys managing director and chief operation officer Nandan Nilekani has projected that the outlook for the first quarter ending June 30, 2001 would see a total income of about Rs 5.90 billion, and the EPS is expected to be around Rs 28.

Both Murthy and Nilenkani, however, did not reveal whether the company would be able to maintain the same 200 per cent dividend payout at the end of the current financial year.

In a bid to survive the upheaval in the US economy, and make up for the slowdown in its tech industry, Infosys, this year, will be focusing increasingly on Europe and the Asia-Pacific region. There will also be a radical shift from telecom and dot.com projects to more traditional economy projects like food processing and financial services, including insurance and banking.

Murthy, however, asserted that unlike several global tech companies in the US and elsewhere who were laying off thousands of employees, Infosys would not be retrenching any of its software professionals. "On the contrary, we will be adding about 2,000 more employees in the current financial year though it will be 50 per cent less than what we have recruited in the preceding fiscal year, which was over 4,442 techies."

"Even in the case of revenue and net profit projections made for this financial year, Infosys will be posting modest growth rates unlike several IT companies in the US, which have already given warnings of negative growth rates in gross revenues and net incomes," Murthy stated.

As a result of slowdown in the US tech sector, Infosys expects to do more offshore than onshore work as majority of its US clients will be stepping up outsourcing from its Indian operations. During the just concluded fiscal year (2000-01), the company executed around 51 per cent of its job onsite and the remaining 49 per cent of its work orders were undertaken offshore.

A swot analysis of the financial year (2000-01) under review shows that region wise, Infosys revenues dipped to 73.5 per cent from 76 per cent in North America over the corresponding period of the previous year (1999-00), whereas it went up to 18.8 per cent from 14.8 per cent in Europe, and to 6.3 per cent from 5.8 per cent in the rest of the world.

According to Infosys' director and chief financial officer T V Mohandas Pai, the company had made provision of Rs 150.29 million for writing off its entire strategic investments it made for investing in EC Cubed Inc and Alpha Thinx, the two US-based companies which have filed for liquidation.

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