Analysts expect sales growth from Infosys

Anshuman Daga

BANGALORE: What a difference a year makes.Last April, Indian software

bellwether Infosys Technologies Ltd. shocked markets by forecasting a mere 30

per cent increase in sales for the year after growing at an average of 85 per

cent in the preceding five years.

But when India's No 2 software exporter reports full-year results on

Wednesday, analysts will be more than happy if the company retains the same

forecast amid intense pricing pressure and weaker demand.

"People are going to focus on Infosys' new initiatives like the

game-plan on the business process outsourcing front and gauge the extent of its

preparations," said Sujit Sahgal, head analyst for Asian software services

at UBS Warburg, Singapore.

Leading software companies are eyeing a new growth opportunity in remote

outsourcing -- processing payrolls, financial claims and other backoffice

services for overseas clients at reduced costs. Analysts expect Infosys, which

earns more than 70 per cent of its revenue from North America, to forecast sales

growth of 15 to 20 per cent for this year. This will set the tone for the

sector.

Sales and profit in the final quarter ended March 2002 are likely to crawl up

by 1.5 to two per cent, one of its slowest ever quarter-on-quarter growths,

analysts said.

They forecast Infosys to report sales of about Rs 6.7 billion ($137 million)

in the past quarter and profit of roughly Rs 2.1 billion. For the full year, the

firm's sales and profit are seen up about 32 per cent and 25-27 per cent

respectively.

Quick recovery elusive



While an economic recovery in the United States suggests a pick-up in business
is coming for



India's software sector, analysts say it will take at least two quarters before
this is reflected in firms' results.

India's $6.2-billion software export industry gets the bulk of its revenue

from low-cost software maintenance for a wide range of customers including

telecoms equipment makers and financial giants.

"Although 2002/03 will continue to be a challenging year for Indian

software, we believe things are looking up at the margin," Credit Lyonnais

said in an earnings preview report. "Most rate re-negotiations are

complete, client visits are on the up-tick and some large RFPs (request for

proposals) are said to be up for takes."

Infosys' shares have fallen 23 per cent at the Bombay Stock Exchange in the

past three months due to concerns about an unexpectedly sharp drop in the

company's high-growth rates. In the same period, Bombay's information technology

index has shed about 11 per cent.

Infosys closed flat at Rs 3,626.80 on Friday, trading at about 30 times its

projected earnings for the past year to March, with the market setting a much

higher value for the company than for most other software firms.

Set up two decades ago by seven technology entrepreneurs with a capital of

$250, Infosys was the first Indian company to list in the United States. It

serves about 300 diversified clients such as American Express Co and Nortel

Networks.