Clients delaying decisions, large deals under scrutiny: SD Shibulal

IT major Infosys ushered in the earnings season today reporting higher than expected revenues and profits for the quarter ending December 2011. The company has revised its dollar revenue guidance downwards amid concerns of increasing macro-economic headwinds in US and Europe.

Here are edited excerpts of NDTV's interview with SD Shibulal, CEO and MD, Infosys and Rajiv Bansal, VP and Head (Finance), Infosys.

On earnings and guidance:

SD Shibulal: We have done well even though we have reported the lower end of the guidance. The environment is different and there is lack of confidence. There is currency volatility and regulatory volatility. We are operating in this unstable, volatile environment. We are not seeing the political will to close things. Our guidance is a statement of fact.

Rajiv Bansal: There's no flip-flop (in guidance). It's a statement of fact. We want to be absolutely true of what we see today. In October, we revised our guidance not because of business reasons but on the basis of cross currency fluctuations.

Clients and deals:

SD Shibulal: We have added 49 clients out of which six are Fortune 500 clients. The number of million dollar clients has gone up to 391 from 388. We signed five large deals in Q3 out of which two were above $500 million. We have witnessed strong deal closures and client additions.

Rajiv Bansal: Where we have added clients, the moment the environment turns better, the ramp ups would be faster. We have increased out hiring from 45,000 to 47,000.

Macroeconomic environment:

SD Shibulal: The environment remains uncertain. The economic crisis in US and Europe is different from the 2008 crisis. The 2008 crisis happened very fast and got addressed very fast too. However, addressing the European crisis will take time.  We are witnessing reduction in the velocity of business. We are seeing delay in decision making and larger deals are being scrutinized closely. We have to remain cautious. Where deals have been closed, the ramp up is slowing down.

Pricing:

Rajiv Bansal: Pricing increase is 5 per cent year-on-year and 4 per cent in constant currency. Pricing is likely to be flat next year. It has gone up over the last nine months and is likely to remain stable. Pricing will not come down.

Client budgets:

SD Shibulal: Budgets are getting closed and they will close by mid-February. Budgets are flat or down. Client confidence on spending depends on the environment which is volatile.

European business:

SD Shibulal: Offshoring in Europe is low which is an opportunity for us. One of the Fortune 500 deals we have closed in this quarter is from Europe.

Rajiv Bansal: With the investment we are making in Europe, business should grow much faster there.

Looking ahead:

SD Shibulal: It's too early for us to discuss the next quarter. Clients have tremendous interest in offshoring and us as a company. Clients are making their choices. We have seen very strong client addition. Most CEOs are grappling with how to increase growth in a volatile environment. They have cash in banks but are not sure how to spend it. There is volatility in euro and other currencies. Revenue growth in larger corporations is a concern.