Infosys Technologies, which has cash in hand of about $3.5 billion (Rs 15,857 crore), said acquisition is a priority in the coming year, though the firm would continue to be selective. In an interaction with FE?s Rachana Khanzode, CFO V Balakrishnan said the revenue guidance of 16-18% for FY11 is purely volume-driven and that pricing is expected to remain stable. He added that currency volatility and the European economy would continue to remain a concern for the technology industry. Excerpts:

Considering you have cash of about $3.5 billion, would a large acquisition be a priority for the firm in the coming year?

We have missed out on acquisitions but we haven?t missed the growth trajectory. We have always been selective in our acquisitions and there is no point in going ahead if it doesn?t make business sense. In fact, the 16-18% revenue guidance indicates that we are on the right track. So, acquisition is a priority for us, but we will be selective.

How does the demand environment look like at the moment? What would be driving the 16-18% revenue growth in the coming year?

Discretionary spending is returning and we are seeing deals in the range of $150-200 million. Though the US would continue to lead the recovery, concerns over the economy and debt in the EU, especially with Greece, are expected to continue. We also expect the currency to remain volatile in the short term. Therefore, 16-18% growth would be purely volume-driven across sectors. The BFSI is expected to lead the road of growth while telecom is stabilising now.

Could you explain the indicated margin drop for the next fiscal? How do you expect to mitigate the impact?

We had taken Rs 44.50 to a dollar for the currency, which means 6% appreciation in the rupee against an average rate for the full year of FY2010 that will have an impact of around 3% on the margins. An average wage hike of 14% is expected to impact another 3%. Also, the effective tax rate in this fiscal is 21%, while next year, it could go up to around 25%, bringing an impact of 70-80 bps. But we would be hiring 30,000 people and most of it would be at the bottom of the pyramid with low costs. Also, we will improve our utilisation by about 2% improving margins by 1.5%. We would also be looking at cost optimisation. So net-net impact on the margin for the full year is only 150 bps. If the growth comes beyond what we expect, then probably that will give us some buffer on the margins.

Do we see any improvement in pricing?

Last year, we saw a drop of 4% in pricing. We expect it to be stable for the year. Any further improvement looks unlikely at the moment.