Infosys disappoints on growth

Infosys, which gets 74 percent of sales from the U.S., can't sustain triple-digit growth

By Staff and wire reports

BANGALORE, India -- Shares of Indian software leader Infosys Technologies Ltd. plunged to an 18-month low Wednesday.

They dropped 16 percent, the daily limit on the Bombay Exchange, after the company said revenue would not grow as strongly as expected.

The shares were stuck at 3,238.85 rupees, or $69.49 -- the lowest level since September 1999, when it struck 3,050 rupees.

Chairman N.R. Narayana Murthy said he expects revenues to grow 30 percent in the next fiscal year. That's down from triple digit growth and worse than analysts expected.

"This is a climbdown from the company's earlier stance that margins will be protected and that revenue growth will be around 50 percent," said Mahesh Vaze, software analyst at Motilal Oswal Securities.

But Murthy denied that Infosys, India's third-largest software exporter, is facing a cut in its billing rates.

"There are no pressures on the billing rates from the existing clients," he said, adding that Infysys' customers have not asked to renegotiate prices.

Fourth quarter up 94.5% but disappoints

Analysts are worried that spending is slowing at Infosys' largest customers, technology companies such as Cisco, Nortel and Lucent.

The stellar growth that major Indian software companies have posted the past several years is likely unsustainable due to the global slowdown in tech spending, especially in the United States.

North America accounted for about 74 percent of Infosys' total revenues in the third quarter.

Infosys earlier reported a net profit of 1.82 billion rupees, or $39 million, in the January-March quarter, on revenue that doubled to 5.72 billion rupees, or $122.7 million.

The quarter's profit was an increase of 94.5 percent but failed to hit the consensus estimate of 1.85 billion rupees.

Infosys forecast total income in the fiscal year through March 2002 will rise to between 25 and 25.6 billion rupees. That's up from 19.6 billion rupees for the year ended March 31.

The trend of declining blended rates and the shift to offshore projects was likely to continue and this will put additional pressure on profit margins, analysts said.

Blended rates refer to weighted average billing rates.

Analysts were also unhappy with the rising cost of non-revenue generating employees, known as the bench.

"The company has said the cost of the bench in the last quarter was around $1.6 million, but their calculation excludes trainees," said one analyst at a domestic brokerage, who estimated the cost at $35 million per annum.

Reuters contributed to this report.

Infosys

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