'Mother of all recession' hits Infy outlook

BANGALORE, INDIA: In February 2009, N R Naryana Murthy, chief mentor of Infosys Technologies, termed the current recession as the 'Mother of all recession'. To match this prophesy, Infy has announced a mother of all outlook, an expected growth of 1.7 to 5.7 per cent for the year 2009-10.

Comparing this with the average growth rate of 30 per cent, naysayers are out with the prediction of doom for outsourcing. Far from it, given the global economic condition, Infy's outlook should instill more hope than the gloom one expects.

Analysts are now expecting other IT majors, the DQ Top 20 companies, to follow a similar pattern of announcing a flat growth outlook.

In a bullish market, a flat growth would be real bad but not in a market which is in the midst of a recession. IT industry has now learnt to shrink and expand its expenses and operations according to the market fluctuations. Last few months demonstrated this amply.

Any implosion further than this would definitely hurt the industry but for now people can take umbrage in Infy's outlook and hope it is proved correct and more so it is Infy's classic, "under commit and over perform" behavior.

The year in review and year ahead

Now for some hard figures. For the year 2008-09, Infy's total revenue grew by 30 per cent at Rs 21,693 crore. Earnings per share for the year in review is about Rs 104 as compared to Rs 85 the previous year.

For the first quarter ending June 2009, Infosys said it expects the revenue to be in the range of Rs. 5,379 crore and Rs. 5,480 crore, showing a growth of 10.8 per cent to 12.9 per cent, while on a sequential basis it will be a drop of around 5 per cent.

"The pricing for the quarter declined by 3 per cent,” said S.D. Shibulal, chief operating officer. He also says that the pricing environment continues to be challenging.

The company got hit in the Financial Services vertical and Telecom vertical. For the year 2008-09, Infosys revenues from Financial vertical contributed 33.9 per cent whereas for the previous year (2007-08) it was at 35.7 per cent. Telecom vertical revenues were down from 21.6 per cent to 18.1 for the same period.

Meanwhile, the revenues from the Europe came down from 28.1 per cent in 2007 to 26.4 per cent in 2008.