Infosys feels the heat of global meltdown

Bangalore, April 16 (Inditop) Infosys Technologies, India’s second largest IT bellwether, attributes the projected revenue growth decline for the first time since its inception to the global meltdown.

“Yes, this is the first time for the full year we have given a guidance of de-growth year-on-year (YoY), as we have never faced this kind of uncertainty, which comes across once in a lifetime,” Infosys chief executive S. Gopalakrishnan told IANS.

Maintaining that the situation began to change for the worse from mid-September last year, Gopalakrishnan said the single digit growth (1.7-5.7 percent) in rupee terms and a decline (of 7.6-3.3 percent) in dollar terms for this fiscal was based on hard reality such as lower IT budgets, thanks to the global meltdown.

“We based our annual revenue guidance on the feedback we got from our clients, especially in the US, due to lower IT budgets to the extent of 10 percent over the last fiscal,” he said.

According to him, the three factors that will impact the company’s performance are decreasing volumes, challenging pricing and heightened volatility in the currency market.

“We have to wait and see whether we can revise our guidance upwards or downwards in the coming quarters. The uncertainty is unprecedented,” Gopalakrishnan said.

In a span of 12 months, the rupee depreciated by a whopping 22 percent from around Rs.39 to a dollar to over Rs.51 last fiscal, as against 13 percent appreciation in the previous fiscal.

“We have never seen such volatility in the currency market. We can manage steady change in currency. But what we have seen is an unprecedented volatility in a very short period of time,” Gopalakrishnan noted.

Reacting to US president Barak Obama’s observation on signs of recovery in the American economy, he said: “Our clients are not saying that.”

Gopalakrishnan said most clients have cut back on IT spending, and added: “Today’s signals are coming from analysts and economists and not from our clients. About 60 percent of our clients have finalised their budgets, which are 10 percent lower than in the past.”

Though Infosys managed to meet its revenue guidance of Rs.21,693 crore for 2008-09, a robust growth of 30 percent YoY under the Indian accounting standard, its forecast for 2009-10 at Rs.22,000-22,900 crore, projecting 1.5-5.7 percent YoY growth pointed to the end of double-digits growth.

In dollar terms, consolidated revenue is expected to decline to around $4.35-4.52 billion in fiscal 2010 from $4.7 billion last year due to steady weakening of the rupee and pricing pressure under the International Financial Reporting Standard (IFRS).

Similarly, for the first quarter this fiscal, though revenue forecast under the Indian accounting standard at Rs.5,379-5,480 crore projects a modest growth of 11-13 percent YoY, in dollar terms, revenues could decline 8.2-6.5 percent YoY to $1.06-1.08 billion.