Ghost of Satyam scandal haunts Infosys investors

BANGALORE, INDIA: Yes, Infosys chief financial officer Balakrishnan’s presentation about the financial performance of the company during 2008-09 was peppered with super hit Hindi hit songs ranging from ‘Rab ne Banaya (Infosys) to ‘Jai Ho’, but it was the anxiety about the ‘munda bigada jaaye’ that concerned the Infosys investors, as it was reflected in their response at the 28 annual general meeting of the company here today.

Though Balakrishnan presented a bright picture of the IT giant which achieved a revenue of US$ 4.66 billion and a net profit of US$ 1.28 billion in the fiscal 2009, one investor asked the auditors of the firm if they have physically checked the bank accounts of the company and made sure that the account statements are correct.

He said he was compelled to raise this issue because of the Satyam fiasco where the investors had taken the Satyam books for granted thus resulting in the greatest corporate fraud in India.

Another person even suggested appointing an independent director who is a practising account to head the audit committee of the company.

The investor concern in tough times was evident when another one asked whether the Induction of K.V.Kamath, the non-executive chairman of ICICI Bank, into the Board would impact as the prospects of a banking solution like Finacle, as competitors are likely feel hesitation to purchase a solution from the company where their competitor is on Board.

However, Narayana Murthy brushed aside these concerns saying that such an anxiety has no ground in it. Today’s meeting inducted Kamath into the Board of Infosys.

On the other hand, another investor was wondering why Infosys was not interested to takeover Satyam.

To this Infosys CEO and Managing Director Kris Gopalakrishnan said at this point of time the requirement of acquisition is not in India but outside India.

Another investor, citing a media report, which said Narayana Murthy had sold 0.36 per cent of his stakes in Infosys, asked whether such moves wouldn’t affect investor confidence.

CFO Balakrishnan in his presentation said the company has grown strongly in rupee terms and recorded a net profit of Rs 5,880 crore in 2009, which is an increase of 30 per cent compared to 2008. He also said the sharp depreciation of rupee against US dollar helped Infosys in its margins. He said Infosys proactively managed its currency exposure thereby minimizing the impact of currency movements on the margins and net income.

Though the company continued to invest in growth, Balakrishnan said the subsidiaries of Infosys - viz Infosys Consulting, Infosys China, Infosys Mexico, Infosys Australia,  are yet to make profit. When an investor asked why the company is holding on to the loss-making units, Kris Gopalakrishnan said that Infosys is working hard to make these ventures profitable.

Chief operating officer S.D.Shibulal, in his presentation said that Infosys added 156 new clients in the last fiscal and as on March 31, 2009, the company has 579 clients. He also said Infosys derived 97.6 per cent of its revenues from repeat business, of which top 10 clients contributed 27.7 per cent of its revenue.

Shibulal said Finacle currently powers 114 banks across 62 countries, helping them serve over 244 million customers. He also said that the India business is seeing traction, as the Uttar Pradesh Power Corporation and three Rajasthan-based power distribution companies consulted Infosys for power reforms programmes.

He also said the Income Tax Department, Govt of India, has engaged the company to set up a central processing centre to collect, digitise and process IT returns. Then Thermax, a global solution provider in energy and environment engineering also consulted Infosys to implement an end-to-end IT-enabled business platform.

Vertical-wise, while manufacturing footprint increased by five per cent Y-o-Y to 19.7 per cent, banking and financial services showed a decline as it came down to 26.7 per cent from 28.5 the previous year.

While for Infosys, retail is another segment that showed a marginal increase along with energy and utility segment, business from telecom sector showed a declining trend.

He also said Infosys has honoured all 19,828 offers made to engineering students during the year and they would join between June ’09 and March ’10. The company received over 4,88,674 applications from prospective employees, and the net addition to the workforce was 13,663 and the gross addition was 28,231.

When asked how many employees are there on Bench Kris Gopalakrishnan said there are around 13,000 under training programme and the employees are an investment for future for the company.