Infosys Reports Strong Earnings On Pent Up Demand During Recession

October 16, 2010

According to news reports, Infosys Technologies has posted robust earnings along with net profit for the quarter ending in September. The company says clients are beginning to place orders again in the wake of the recession.

Infosys is India’s no. 2 outsourcer, and it has reported a whopping $1.5 billion for the September quarter. This figure is up 29.6 percent over year ago figures. The company’s net growth has improved a surprising 18 percent to $374 million for the same quarter.

According to market watchers, the results at Infosys is in synch with its competitors TCS and Wipro. These firms are expected to post their figures later in October.

Infosys Reports Strong Earnings On Pent Up Demand During Recession
The improvement in performance is also reflected in the company’s hiring. Incidentally, the hiring levels are now in line with the hiring levels prior to the recession, according to CEO Vati Consulting, Amitabh Das. Vati is a recruitment firm based in Bangalore.

.However, analysts are quick to warn that profits could shrink for Indian outsourcers as big multinational firms begin to tap into the market.  These services companies usually have offshore offices that engage in outsourcing to India and other low cost regions.. In addition, costs are likely to rise for Indian firms trying to establish bases in the U.S., which has expressed strong protectionist sentiment against outsourcing.

According to research director of Everest Group, Jimit Arora, clients are also going to be consolidating suppliers. This means that less companies will be able to get big deals and those that are selected will tend to get more of the work. In addition, pricing is going to be a large factor in determining suppliers.

Infosy has said that revenue for the year ending March 31, 2011 is likely to go up by 24 or 25 times the usual figure to about $6 billion. Similarly, revenue is also likely to see a spike of 25.6 to 26.8%. The results reported by Infosys are consistent with the International Financial Reporting Standards.

Incidentally, the quarter leading up to September 30 is most likely the most robust quarter for outsourcers in India. Much of the growth in revenue addition in 2010 stems from repressed demand for offshoring that was put off due to the recession.  However, the revenue growth will relatively decrease for outsourcers in India toward the next financial year.

Nonetheless, Infosys says the outsourcing industry remains challenging amid the continued global uncertainty and the currency volatility in India and the U.S., reports PCWorld.


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