Infosys outlook upped to positive on conservative financial policy - S&P

MUMBAI, Jul. 24, 2007 (AFX International Focus) -- Standard & Poor's (NYSE:MHP) Ratings Services revised its outlook on the corporate credit rating on Infosys Technologies Ltd (NASDAQ:INFY) to positive from stable.

At the same time, S&P affirmed the Indian information technology major's 'BBB' rating.

'The corporate credit rating reflects the conservative financial policy and profile of Infosys, where the company remains debt-free as at March 31 2007,' said S&P's credit analyst Wee Lee Cheng.

'The company also continues to improve its business and customer diversity in North America and Europe. In addition, Infosys has been increasing its new services... while maintaining its basic development and maintenance services base,' Wee Lee Cheng added.

This strong revenue growth is also supported by the company's superior and improving cost efficiency where it still manages an efficient cost structure and high quality workforce in an industry where there is continuing staff attrition and wage inflation, S&P added.

However, the above strengths are partly balanced by the company's continual investment in high capital expenditure and training. In addition, Infosys operates in a highly cyclical and competitive IT services industry where it faces constraints in its India-based operations and visa restrictions for some overseas markets for its on-site work, S&P said.

Moreover Infosys is also exposed to foreign exchange fluctuations where 95 pct of its revenue is from overseas contracts in US dollars and the euro, while its operating expenses are largely denominated in local currency.

The rating on Infosys is likely to be raised if there is further significant diversity in geographic, customer, industry or product services offerings while maintaining operating margins above 25 pct with modest financial risk profile and high liquidity position.


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