Jan 15, 2009

Business - Q&A CFO Infosys

P.P.Thimmaya

BANGALORE: Infosys Technologies is seeing some rivals undercutting prices in an intensely competitive market for outsourcing deals but it expects to maintain operating margins because of its ability to control costs, CFO V Balakrishnan said in an interview.

V Balakrishnan
V Balakrishnan
India's second largest software exporter after TCS beat market expectations with its results for the October-December third quarter, growing revenue by 6.8% over the previous three-month period. Excerpts from the interview.

How is the pricing environment?

We are comfortable with the current position. We are seeing some irrational behaviour of competitors with some of them cutting prices. The environment is still challenging and pricing could get impacted, may not be materially, but we are comfortable. Today we need to identify the pain points of our customers and see how we can help them.

Will Infosys always focus on higher margins?

We will always focus on higher margins. We want to have superior margins with high growth... quality growth. We have enough levers on the cost side to maintain these margins and we have been constantly saying that the model is built for times like this, it has been tested.

What about the cash and cash equivalents of Rs 9,686 crore?

We want to be highly liquid for the short-term. We put our money either in fixed deposits (FDs) or liquid mutual funds. Right now the returns on FDs are higher, so all our investments are in these.

Today, 67% of our cash is present as bank balances are in nationalised banks. We have a process where auditors independently verify the bank balance and there are enough checks and balances. From now on, we are disclosing the full details of the cash and cash balances about where we have deposited the money and how much. It is a very important disclosure in the current environment, where there is total lack of trust and crisis of confidence, such a measure will improve the investor confidence.

Why is this additional information of constant currency being given?

We have seen very high volatility of currency in the last two quarters. In the last quarter (December end), the UK pound depreciated by 18% against the dollar, the Australian dollar by 23% and the euro by 11%. In a volatile environment like this, it affects one's reported dollar numbers and we give this additional information like constant currency, so that the investors get a clear idea about the business.

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