Posts Tagged ‘Infosys’

Mixed bag seen for IT services firms

April 2nd, 2014

The performance of the Indian information technology (IT) services sector during January-March 2014, the financial year’s fourth quarter (Q4), is likely to be a mixed bag.Outsourcing34

Most large companies are expected to show a 2-3.5 per cent quarter-on-quarter (QoQ) growth in revenue, amid appreciation of the rupee, seasonal weakness and company-specific issues.

Tata Consultancy Services (TCS) is likely to continue being the top performer. Infosys, the second largest, is likely to show a marginal decline or tepid growth. Wipro’s performance is expected to converge with those of peers.

“The results are likely to be mixed, with seasonal softness (slower decision making on ramp-up of new projects at the start of a new year),” brokerage firm IDFC Institutional Securities said in a note. “We expect the commentary to be positive, on the back of a healthier demand environment for IT outsourcing.”

The brokerage company estimates sequential revenue growth of the top five IT firms to be in 2.5-3.5 per cent, barring Infosys, which it sees posting a tepid 0.3 per cent rise.

On similar lines, Religare Institutional Research expects most IT companies to have revenue growth of two to three per cent, with Infosys posting a 0.3 per cent sequential decline.

The expectations from Infosys have dipped after the company’s management said last month that weakness in client spending continued through the quarter. It also said it saw “unanticipated project ramp-downs and cancellations” in Q4, and faced “challenges in skill mismatches”, which might lead to meeting only the lower end of its annual revenue growth forecast. For FY14, the Bangalore-based company had given an expectation of 11.5-12 per cent growth here.

Additionally, Infosys has seen a slew of senior-level exits over the past six months, which some analysts believe is harming the relationships with clients.

On margins, analysts do not expect much sequential movement for most IT services companies, due to limited currency movement. However, some companies could take a hit due to salary increments. Analysts estimate Infosys would forecast a seven to nine per cent revenue growth for FY15.

“Ebit (earnings before interest and tax) margins are likely to remain stable,” Anand Rathi Shares and Stock Brokers said in a pre-earnings note. “The average currency realised rate for Q4 is going to be very similar to that of Q3, giving room for companies to maintain their margins at the same levels as last quarter. Also, in the absence of other headwinds during the quarter, barring Tech Mahindra (which will book wage rises during the quarter), we expect companies to maintain their margins at Q3 levels.”

Investors will remain watchful of companies’ outlook for FY15, as there was mixed commentary over recent months. While some of the large entities had a bullish demand environment, many others have said decision making by clients was still slow. Additionally, comments about currency management will be key, after the rupee recently reversed direction.

“We expect management commentaries to reflect cautious optimism on the return of IT spend in the US, increasing adoption of outsourcing in Europe and overall pick-up in the large deal pipeline,” said IDFC Institutional Securities.


Infosys wins outsourcing contract from Volvo

March 18th, 2014

India’s second largest software services exporter Infosys Ltd has won a new outsourcing contract from automaker Volvo Car Corp. to provide application development services for its global operations.Outsourcing1

No financial details of the transaction were disclosed.

As part of the deal, Infosys will develop applications to support functions such as sales and marketing, customer service, manufacturing and product development for Volvo.

“We will be a strategic supplier for Volvo Cars to deliver excellence and innovation to transform their IT landscape to a modern architecture,” Nitesh Bansal, vice-president of manufacturing at Infosys, said in a statement. “This agreement also reflects our strategic focus on the Nordic market and strengthens our presence in Sweden.”

Infosys has an existing deal with Volvo that was first signed in 2010. The Bangalore-based firm also has outsourcing agreements with other automotive firms such as BMW AG, Daimler and Toyota.


Infosys BPO collaborates with Costa Rica to train students

January 30th, 2014

Infosys BPO, the business process outsourcing subsidiary of IT major Infosys, on Wednesday announced that it was collaborating with the Government of Costa Rica and the Costa Rican Investment Promotion Agency (CINDE) to train students on technical and business process skills.

The programme will play an important role in strengthening the existing talent pool in the country and provide an enriching international exposure to the selected students, the company in a release said.

The agreement was signed in the presence of Vice President of Costa Rica Luis Lieberman, it added.

Infosys said, “The 10-week intensive training programme will see 64 students acquire skills on SAP and Cloud technologies based on Microsoft and JAVA platforms at the Infosys campus in Mysore, India.” The first programme is slated to complete by March 2014.


Infosys reportedly wins a $98 million contract with TNT

January 30th, 2014

Infosys, India’s second largest outsourcing supplier has reportedly been awarded a $98.71 million contract with TNT Express, according a Times of India report.

TNT is believed to have contracted the IT outsourcer as part of the couriers aim to create savings of $220 million by 2015. The IT contract is designed to help the company achieve savings targets through a combination of consolidating and optimising services.

As part of its infrastructure development plans, Infosys will deploy new online booking and payment platforms.

Infosys will also support TNT’s move to increase its focus on lucrative international markets.


Infosys lifts revenue growth outlook on improving outsourcing demand

January 13th, 2014

Infosys  is chasing more big-ticket contracts from Europe and the United States this year and keeping a lid on costs as the outsourcing services giant powers ahead with a turnaround to regain market share.

India’s second largest software services exporter raised on Friday its revenue growth outlook for the 2013/14 financial year to between 11.5 and 12 percent from a previously forecast 9-10 percent, citing higher demand for its services.

It reported its first decrease in its workforce in nearly five years, with overall attrition rates in the December quarter rising to 18.1 percent from 15.1 percent a year ago.

“While the organisation is going through transformation, there may be some minor disruptions,” Chief Executive SD Shibulal told an analysts’ briefing after announcing the company’s earnings.

“But as you can see over the last two or three quarters as the transformation has happened we have continued to focus on our clients, we have continued to focus on growth, and continued to focus on margins improvement.”

The departure of 1,823 staff in the December quarter, and several senior executives over the last six months, comes amid a strategic shift led by founder N.R. Narayana Murthy, who was brought back last year after a string of disappointing results.

Infosys did not say whether the employees had been laid off or had left voluntarily.

“I am not too worried about it. With every restructuring there are some people who have to go,” said Juergen Maiar, a Vienna-based fund manager with Raiffeisen Euroasien Aktien, which owns Infosys shares.

“We are looking at improvement in utilisation with the reduction in staff numbers, which is good for investors.”

Infosys shares rose as much as 3.6 percent after the company announced its quarterly earnings. The Mumbai stock market was trading 0.7 percent higher.

Infosys was once considered a bellwether of India’s export-driven $108 billion IT outsourcing industry, but an inflexibility on prices, among other factors, resulted in it losing market share to rivals like Tata Consultancy Services,   Wipro  and Cognizant Technology.

Infosys, which has been struggling to boost revenue from its own software platforms and high-margin consulting business, appeared to have some success in winning over large deals as the turnaround took hold. It said the number of $100 million-plus revenue clients rose to 15 in the quarter up from 12 a year earlier.

Worldwide IT spending growth is expected to accelerate to more than 5 percent in 2014 after growing last year at its slowest pace since the financial crisis, according to the International Data Corporation. Infosys, whose customers include Bank of America Corp and BT Group, said net profit for the three months ended December 31 was Rs 2875 crore, compared with Rs 2369 crore a year earlier.

That compares with the average estimate of Rs 2715  crore.

Revenue rose 25 percent to Rs 13030 crore  in the quarter. The company added 54 new clients during the quarter, taking the tally to 888.


Infosys begins moving work out of US over immigration Bill fears

January 8th, 2014

Infosys has started moving onsite work in the US to India or near-shore destinations in a move to de-risk itself in case the dreaded immigration Bill becomes law.outsourcing39

Sources in the company confirmed to Business Line that some cost centres, such as general, administrative and sales-support functions, are beginning to be off-shored.

There is also a possibility that the level of off-shoring of services, such as application management, infrastructure management and business process outsourcing, will be increased. This strategy is also expected to lower dependence on the low-margin onsite business.

Most of the off-shoring is being carried out after consultations with clients, said sources.

Congress debate

The move assumes significance as US Congress is expected to take up the Bill for discussion soon. The Senate has already passed the Bill, which seeks to increase visa costs as well as salaries of H1-B visa holders, making it unviable for companies such as Infosys to carry on business in the US.

Over 65 per cent of the revenues of the domestic IT and ITeS industry comes from US clients. Infosys is the second-largest employer of H1-B visa professionals in the US.

IT industry lobby Nasscom has come down heavily on provisions in the Bill, stating that they amount to non-tariff barriers.

An analyst with Prabhudas Lilladher said the immigration Bill continues to be the source of uncertainty for offshore vendors, such as Infosys and TCS. The margins of Indian IT service vendors will get impacted if any version of the Bill increases visa costs or mandates more local hiring.

However, Vintha Khatwani of Kotak Securities said that while there is some unease over the proposed Bill, the impact will be limited.

Lobbying Congress

Last year, a group of eight Indian IT companies, including Infosys, formed a lobby to influence US Congress to drop crucial clauses in the Bill. Infosys had also said that it is in discussions with clients for a contingency plan in case the immigration Bill becomes law. The company had said it was examining the option of off-shoring work in case the Bill became law.

In fact, it has started implementing the strategy even before US Congress has taken the Bill up for discussion.


IT companies TCS, Infosys, HCL and Wipro in good spirits over buzz of discretionary boost

January 8th, 2014

Early indications are that 2014 will see an acceleration in spending on information technology outsourcing, which should be visible in the deal wins and commentary as Infosys kicks off the fiscal third-quarter earnings season on Friday. Most industry executives are gearing up for a pickup in discretionary projects as well, in the quarters to come, which are good-to-have but not vital to day-to-day operations.outsourcing35

“The demand environment will be solid, and discretionary spending particularly in the area of digital transformation,” said Ganesh Natarajan, CEO of Punebased Zensar Technologies. “I expect investments in cloud, mobility, analytics and big data to substantially accelerate in 2014 and beyond,” he said.

Spending on discretionary projects is a good indicator of demand.

“We are bullish on the IT services sector, demand remains good in the US and broadly speaking, it is looking better in 2014 compared with 2013,” said Apurva Shah, senior portfolio manager at BNP Paribas Mutual Fund.

While there will be specific challenges, such as the ongoing US immigration overhaul, which could potentially make it more difficult and costly for the Indian IT companies to get visas and outplace consultants, the strongest correlation is with IT spending, Shah said. The fund has an ‘overweight’ view on the sector.

“I think the discussions are encouraging, but we will have to see for them to be able to transfer into budget and the spend for next year, but yes, definitely the early signs are very, very encouraging,”

“In the US, there’s a lot of positive mood,” N Chandrasekaran, chief executive at India’s largest software services provider, Tata Consultancy Services, told reporters last month. “We expect discretionary spending next year to see an uptick based on the conversations we have had.” Even Infosys, which is attempting to regain its growth momentum after lagging the industry in recent times, is more confident of a pickup in spending, and analysts are expecting the company to raise its full-year forecast.

Many analysts expect Infosys to raise its dollar-terms sales forecast for the year ending March 2014 to as much as 12% from the current 9-10%. That matches the lower end of the 12-14% growth forecast by industry lobby Nasscom for the $108 billion sector’s exports. “The discretionary spend, which has kind of disappeared from the market in the last two to three years seems to be coming back,” Rajiv Bansal, Infosys’s CFO told investors at a conference organised by US bank Wells Fargo, about half way through the quarter that ended December 31.

“I think the discussions are encouraging, but we will have to see for them to be able to transfer into budget and the spend for next year, but yes, definitely the early signs are very, very encouraging,” Infosys chief financial officer said.

Typically, the three months ended December 31, are seen as a seasonally weaker period for earnings. Workers go on furloughs, especially among manufacturing clients, and projects see little action during the period from Thanksgiving to until after new year’s day in the export-driven sector’s largest markets, the United States and Europe, including Britain.

Revenue for the top five Indian IT firms will grow between 1.1% and 3.7% in the December quarter compared with the previous three months, Pratik Gandhi, an analyst with IDBI Capital Markets wrote in a note to clients.

Gandhi expects fourth-ranked HCL Technologies to report the highest growth at 3.9%, driven by strong demand for its services remotely managing large data centres while he expects Infosys to post the lowest growth at 1.1%.


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