Despite gaining on historic rupee depreciation during the December quarter, Infosys it is not upbeat about the long-term impacts of a spiraling domestic currency, with its top officials hoping for stronger action from the Reserve Bank in bringing stability.
The dramatic fall in the rupee?s value against the dollar through Q3 has helped Infosys pull margins up by 300 basis points, to 31.1%, against 28% in the September quarter. However, considering that the volatility is disruptive even to exporters, the central bank needs to step in with more ?active? measures, said V Balakrishnan, chief financial officer, Infosys.
?The RBI needs to have a clear and stable policy on managing the exchange. Today, whatever they do is very ad hoc. Sometimes the government has to step in, and not let the market decide the levels. Verbal and physical intervention is required. China has done it well,? Balakrishnan said to FE.
?We have reserves of $300 billion. If we don?t use reserves when the volatility is at 11%, when are you going to use it? They have to become active, or it will hurt every company. ? he added. With the rupee likely to depreciate further due to a high trade deficit, and stay in the range of R50-55 for the next two quarters, the company is going to retain its short-term outlook on hedging, covering exposures for two quarters at a time.
Analysts had earlier predicted that with its hedging book position of $847 million, Infosys would outperform margin growths of peers like TCS and Wipro, who have book positions of $2.6 billion and $1.7 billion respectively. ?Margins could have had a benefit of 4.5%, but we had increase in other costs and utilisation was also down marginally. On a net basis, margins went up by 3%,? Balakrishnan said.
However, despite a satisfactory performance on the margins front, a downward revision in its revenue growth guidance for the whole year ended March 2012, sent the IT major?s stocks plummeting by 8.4% on the BSE.
Often considered as an indicator of the overall IT industry?s performance, Infosys? guidance was lowered to 16.4% y-o-y, against 17.1-19.1% projected in the previous quarter. ?We are living in a very volatile world. Customer confidence is low, which is reflected in the spending. Which is why we want to be cautious, and have lowered dollar term revenue guidance,? Balakrishnan added.
?Last year we gave hikes at about 11-13% in India, and 2-3% outside India. We have to take a view on next year?s growth. In all likelihood, wage hikes will be in higher single digits next year and not in double digits. This is likely to happen for the whole industry,? Balakrishnan said to FE. ?Timing is also dependent on how the world turns out. For instance, in 2008, hikes were effected in October and not in April,? he added.
