Infosys anticipates dip in margins

MUMBAI: Infosys Technologies Ltd, expects pricing pressure, coupled with increase in employees, selling and administrative costs to impact the company`s margins. "The margins are expected to decline to 24.3 per cent in the current fiscal, from 26 per cent in fiscal 2002-03," says Nandan M Nilekani, CEO, Infosys, at the analyst meet held on August 11, 2003.

The salary increase for the fiscal 2004, as a percentage of turnover, is expected to be between 1-1.4 per cent. The salary hike is given from the cost saving undertaken by the company. In the June 2003 quarter, Infosys has recruited 2300 employees.

Infosys expects the pricing pressure to continue in the current fiscal, while volume growth will be stronger. Therefore, the company has decided to focus on increasing offshore turnover, moving up the value chain and improving employee utilisation rates.

Infosys to work on internal cost optimisation initiatives by improving utilisation rates, reduced cost of onsite contractors and rationalised onsite non-billable resources.

The company`s projected capex for the fiscal 2004 is around Rs 400-500 crore.

Net impact of rupee appreciation in the first (June 2003) quarter was 0.12 per cent. The impact of rupee appreciation on the turnover in fiscal 2004 was pegged at Rs 100 crore in the turnover guidance given on April 10, 2003.

Infosys has hedged inflows for the next two quarters. The company has sold forwards worth over $ 250 million at an average rate of about Rs 47.03.

New services contributed 35 per cent to the turnover in fiscal 2002-03, against 10 per cent in 1999. Enterprise solution contribution is expected to rise to 20 per cent in the near future.

Infosys generates 65 per cent of the turnover from clients who are with the company for three years. Infosys had 345 clients in fiscal 2002-03, up from 145 clients in 1999.

Source: IRIS