Infosys raises forecast as outsourcing rises

Infosys Technologies said on Friday it had begun adding staff again and awarded its workforce a pay rise as India’s information technology outsourcing sector shows signs of life following the economic crisis.

S. Gopalakrishnan, chief executive of Infosys, said revenue grew 2.8 per cent during the three months ended September 30 against the June quarter, the first time in the past three quarters that sales have shown quarter-on-quarter growth.
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“You want to be cautious because it’s not completely out of the woods but we clearly see some growth,” said Mr Gopalakrishnan.

The improving outlook came as most Indian IT companies are forecasting an increase in outsourcing by their developed world clients, which are looking to cut costs to aid their recovery from the crisis. Infosys added 35 clients during the quarter.

Pricing pressure, which weighed heavily on the industry earlier this year, has also eased thanks to the new demand.

“The pricing environment seems to have stabilised,” said S.D. Shibulal, Infosys chief operating officer.

India’s second-largest computer services group gave its Indian staff an average wage increase of 8 per cent and international staff 2 per cent for this year.

The group had deferred any decision on the pay rise at the beginning of its fiscal year in April because of the uncertain global outlook.

The group also added a net 1,548 employees in the September quarter, bringing its workforce to nearly 105,500, reversing the trend in the first quarter of this fiscal year, when its workforce shrank for one of the first times in the company’s history.

Mr Gopalakrishnan forecast that Infosys would report a 1 per cent quarter-on-quarter increase in revenue and volume over the next two quarters.

“It has definitely been one of the toughest periods for us – for the first time in the history of the company we saw negative growth,” Mr Gopalakrishnan said.

But he added: “We are predicting the next two quarters of sequential growth, again only 1 per cent, but definitely growth.”

Infosys said sales grew 3.1 per cent year-on-year to Rs56bn ($1.2bn), based on the Indian GAAP accounting standard. Net profit rose 7.5 per cent to Rs15.4bn, compared with a Bloomberg forecast of Rs14.9bn.

Based on the international IFRS standard, however, net income fell 0.9 per cent from a year ago to $317m on a stronger rupee against the dollar.