Infosys Technologies has reported robust numbers for Q1FY07, with revenues growing by 14.9% q-o-q on back of 11% volumes growth and 3% depreciation of the rupee against the dollar. A 6-8% depreciation of the Rupee against Euro and Pound has also helped boost the revenues for the first quarter. In the quarter Infosys had a gross addition of 8097 employees while net addition was at 5694 employees (+86%y-o-y). The management has guided for an employee intake of 25,000+ in FY07. 38 new clients were added in the current quarter while client mining was good with 97% of the business being repeat business. On a vertical basis BFSI, Telecom and BPO business witnessed strong double-digit sequential growth.

Margins were impacted in Q1FY07 due to wage hikes to the tune of 3.3% while visa costs have impacted the margins adversely by 1.3%. This was offset to a large extent by the dollar appreciation. Operating margins in Q1FY07 was at 29.5% against 31.7% in the last quarter. The management has guided that operating margins would be stable for the rest of the year. As on 30th June 2006 Infosys has $381mn of forex hedges marked to market at Rs 45.87 per dollar. Billing rates have been stable with an upward bias with new clients coming in at 3-4% higher billing rates.

LOOKING AT OVERALL RESULTS IT LOOKS LIKE TECH & CEMENT SECTOR

This  financial year should see  a 3-4% increase in billing rates from the new clients who are supposed to make about 5% of revenues.Some of the existing clients have also increased the rates but the broader picture is still coming out

Over the long run pricing is expected to improve. Infosys in the NASDAQ 100 by November 2006 would neither help pricing nor fundamentals but create significant demand for the ADR’s because there are funds who invest only in the NASDAQ stocks. A small http://www.theequitydesk.com/forum/forum_posts.asp?TID=382 - PE Rerating could therefore be expected once that is done.

The biggest challenge facing IT firms is the scaling up of operations from these levels the hiring, training and retaining manpower will be the key challenge for the industry. In about 3 years Infy will be managing more then 100,000 employees and that would take some doing. Infosys says it spends US$100m per year on training, and is increasing its training capacity in Mysore from the current 4,500 to 13,500 by year end.

China is not a threat to the Indian IT sector. The wages in China are 20% higher than that to India. Moreover the project management skills are even below that to what is available here.

It is being estimated that Europe and within that, England  will grow much faster than US. Europe is growing at 55-60% annually.

But integration in continental Europe and Japan yet to hit full rhythm, This year Progeon should do $ 130m in revenues, over $85m last year.

Infosys is expanding its bouquet of services so that it could outperform the industry growth rates.

In last 5 years, Infosys has grown revenues at a 38% CAGR, compared to slightly less then 30% for the industry.

I am told that Infosys and probably TCS have offices in the same building in Hungry. These software giants are aggressively looking at newer markets for growth.

Source:  Company Presentation at CLSA meet.

Sorry to post it here Basant ji, but was wondering if you could provide some detailed insight into "Block Deals". Like for example, TCS has had block deals, totaling to around 130,000 shares in the past week at prices around Rs. 1022. What kind of inference can we make out this?

This is just for curiosity's sake, that is all.

Can you tell me about details of who sold or who bought etc.

I just did a search on moneycontrol.com but I dont seem to find it. I saw the news on CNBC channel on Friday. Two block deals, 85K at 1029 and 50K at 1022. Sorry, dont have any more info. It's okay if you cant provide any analysis, based on this; no hassles!

basantji, I respect your view on infy and agree with u....but my specific query remained unanswered....if u cud thro some light on that part

In case you are interested in valueing the company. Then there are 2-3 criteria. Book value, PE, ROCE, RONW.

"Read" has the same spelling in past tense as well as future tense! A magical word in English!!!

Narayana Murthy in an Interview with Economic times a couple weeks ago expressed a position that IT companies should pay taxes since they are utilizing resources of the country and its only fair that they should pay taxes as responsible corporate citizens.

1. Under-promise & over-deliver
2. When in doubt, disclose
3. Softest pillow in the world is clear & clean self conscience

If one thinks rationally, these 3 are a MUST for everyday life, aren't they?

Kulmanji,

Yes, you have analysed nicely the typical qualities of Infosys.

yes, logic does suggest that domestic consumption which is fuelled by the salaried class would be affected but remember none of these companies (exporters) would close down. That is only a threat which could affect PE of these companies.

BasantJi,

Infy and other software companies pays portion of salary in $$ too. If somebody is working for infy and placed in US they get paid Indian Salary+ "Allowance" which in  $$. So only cost that goes up is Indian salary. $$ won't come down to 33 in one week(if at all) so if it takes longer, than salary growth would be lower. But there should be pressure on margin for outsoursing projects.

bubble ji any idea how much the rupee has appreciated against the yen, and the euro and other asian currencies

Tiger

Check this site for all forex details....www.xe.com

BERKELEY - The incoming CEO of http://www.infosys.com/ - Infosys Technologies , India's second-largest software exporter, said it had recently increased its hedging against rupee appreciation but that the profit impact of the currency strengthening remained uncertain.

S Gopalakrishnan, now president and COO, also said on Friday that Infosys was eyeing acquisitions as part of its expansion strategy, adding that when he takes over as CEO next month the company should move faster to take advantage of any opportunities.

He said due to a sustained rise in the rupee against the dollar, Infosys had further increased its hedging since the end of March, when it had US$470 million worth of rupee hedges.

'It is much more than that,' Gopalakrishnan said in an interview midway through a conference on Indian democracy at the University of California, Berkeley, though the ultimate impact on earnings remains uncertain due to continued rupee fluctuation.

'Our guidance is based on a fixed exchange rate of 43.1 per dollar,' he said, noting the rupee now trades at about 40.59 per dollar. 'We can't give guidance every day based on rupee ... it really is what the rupee is at the end of quarter.'

The rupee has hit a nine-year record against the dollar, reducing revenue from abroad when translated into Infosys's reporting currency. Mr Gopalakrishnan says a 1 per cent rise in the rupee against the dollar impacts Infosys's earnings margin by about 45 basis points.

Mr Gopalakrishnan said his company, which has 72,000 workers, was looking at buying smaller, solid companies that wanted to be acquired, but declined to give details.

Nasdaq-listed shares of the company rose 2.9 per cent to US$49.90, after its Mumbai stock rose 2.6 per cent. -- REUTERS

For every 1 person at onsite, usually there are 2 to 3 people at offshore.

I know a few senior guys from the IT industry & their opinion is YES.

If they introduce the currency clause in future contracts, then that shouldn't be a problem. Also, if they are able to negotiate with existing clients with some sort of currency perspective in their existing contracts that would take care of it too. However, the latter part I cannot comment on.

I am not sure on the fine print. CFO of TCS only mentioned that there would be a clause on a TV channel.