While the banking and financial services segment has traditionally been Infosys? stronghold, shrinking margins and high capital requirements in the vertical may have played the largest role in the firm?s dismal performance this quarter.
Through the last three months of the fiscal 2012, the firm has seen delays in contracts, and even ramp down in business from BFSI clients. Total revenue contribution by the vertical for the full year was down to 34.3%, compared to 35.7% in the year ago period.
Growth in the sector has become increasingly challenging. Says V Balakrishnan, chief financial officer, Infosys, ?While profitability in BFSI has gone up over the past year due to miscellaneous causes like write back of provisions, revenues have not been growing, capital requirements have become huge, and margins have shrunk,? he says. ?Most of the impact this quarter was from BFSI, and some from retail.?
However, the company is not planning to reassess its business mix immediately; choosing instead to take a shot at building in non-linearity, and move towards products, solutions, and platforms.
?Our focus is going to shift in terms of the kind of business that we do. It will be on product solutions, platform business, because unless we do that, the non-linearity will not happen,?Balakrishnan says.
The firm currently earns 6% of its revenues from these segments, and is looking at taking that share to a third of total earnings. It is even looking at acquisitions to fill gaps, for which it has been looking at five to ten target companies to spend some of its $4 billion cash reserves on.
Although the bellwether?s performance has set a foreboding tone for Indian IT in FY13, much of the gloom maybe peculiar to Infosys and not necessarily indicative of the industry?s performance as a whole.
?We are seeing impact in our customer base. To that extent, it can be said that the performance and the outlook is typical to us. That being said, we usually see changes ahead of competitors. Only time will tell if we have in fact grown slower than them,? says Balakrishnan.
Rising visa costs will have a 100 basis points impact on revenues in the first quarter this financial year.
?Normally, in April, the H1 visa window opens up and everybody applies for it. Typically there is an impact of 1% on revenues, and you will see that this first quarter as well. Rupee will remain under pressure for some time, but the biggest worry for the future is stability in the global environment,? the CFO adds.