Infosys Forecasts Over 29 Percent Annual Revenue Growth

India's outsourcing industry continues to do well despite higher staff costs.
John Ribeiro, IDG News Service
Wednesday, July 11, 2007 6:00 AM PDT

India's outsourcing industry continues to do well despite the appreciation of the Indian rupee against the U.S. dollar and higher staff costs.

India's second largest outsourcer, Infosys Technologies Ltd., Wednesday revised slightly upwards its revenue forecast for its fiscal year to next March 31. The company said it expects revenue to grow by 29 to 31 percent during the year to between US$4 billion and $4.05 billion.

Infosys, of Bangalore, said in April that it expected its revenue to grow by 28 to 30 percent to about $4 billion during the year.

The company, which is listed both on Indian and U.S. stock exchanges, has however revised downward its revenue forecast in rupees, to take into account the appreciation of the rupee.

India's software and services exports are projected to grow by 26 to 29 percent to about $40 billion in the fiscal year to next March 31, India's National Association of Software and Service Companies (NASSCOM) said this month. The country's revenue from exports of software and services and business process outsourcing (BPO) grew 33 percent to $31.3 billion in the fiscal year to last March 31, according to NASSCOM in Delhi.

The appreciation of the Indian rupee against the U.S. dollar pushes down rupee realizations for revenue earned abroad by Indian companies, even as staff costs in India are going up. The U.S. is the largest market for Indian outsourcers, accounting for about 66 percent of export revenue.

Indian outsourcing companies seem to be holding out well against the pressures.

Infosys of Bangalore has maintained its net margins despite the rupee appreciation, higher wages, and costs of visas to the U.S., the company said Wednesday, while announcing its results for the quarter ended June 30.

iGATE Global Solutions Ltd., a mid-size outsourcer in Bangalore, also said Wednesday that it had nearly doubled its operating margins in the quarter over the same quarter last year, despite a stronger rupee, on account of higher rates from customers, higher utilization, and increased use of offshore delivery of services.

In the quarter ended June 30, Infosys posted revenue of $928 million up by 40.6 percent over the same quarter last year. The company's profits for the quarter were $263 million up by 51 percent from the same quarter last year.

Infosys' results are in compliance with US GAAP ( Generally Accepted Accounting Principles).

The company added 35 new clients and 3,730 employees during the quarter taking the total number of employees as on June 30 to 75,971. Infosys plans to hire 26,000 more staff during the current fiscal year.

Infosys and other Indian outsourcers compete with multinational services companies such as Accenture Ltd. and IBM Corp. which have set up offshore services delivery centers in India to take advantage of the lower cost of staff in the country.

There is, however, enough business going around for both Indian and multinational companies, according to Indian outsourcers. The crunch comes in relation to hiring new staff.

Wipro Ltd., India's third largest outsourcer will be announcing its results for the quarter next week.