The April-June quarter results for Infosys were better than what the market had expected. However, though the company?s revenues grew 12.7% year on year, a drop of 2.9% sequentially clearly reflects that the business environment abroad still remains turbulent and recovery in technology spending of battered clients will take some time.

The company foresees its earnings for quarter ending September this year to decline by 1.9% year on year and the pricing pressure to continue. The lower guidance is in line with a recent Forrester report that says that IT market in the US will shrink by 5%. In fact, Infosys is expanding its operations in Europe and Asia Pacific to cut its dependence on the US, which accounts for more than half of the company?s revenue.

The IT bellwether added 27 new clients in April-June quarter, lower than 37 in January-March and from 49 a year ago. The total tally of clients fell to 569 from 579 in January-March. But interestingly most of the new additions are in the $50 million plus bracket indicating that the outlook for Indian IT outsourcing in medium and long-term remains positive as companies abroad would look to cut cost and improve productivity. On a disappointing note, the revenue contribution from one of its marque clients, slipped to 4.5% from 5.7% in the current quarter. The company reported an impressive repeat business of 98.7%.

A surprising element is that though the company added 3,538 new employees in the quarter ending June, its net employee strength declined by 945 during the quarter to 1,03,905 with an attrition rate of 11.1%, against 13.6% in the corresponding period of previous fiscal. The improvement in margins came in due to the reduction in number of employees quarter-on-quarter and the company has aligned costs to the expected revenue outlook.

Interestingly, the company has seen some growth in application maintenance and system integration and revenue from the telecom industry has increased marginally. Infy?s future tasks? It will have to be extra creative to help its big overseas clients reduce IT costs in a slump. And it will also have invest in application development.

saikat.neogi@expressindia.com