Shortly after Infosys announced its better-than-expected results for the quarter ending June 2013, Chief Financial Officer Ravi Bansal explained to The Hindu why the company remained cautious in its guidance.
In a free-wheeling interview, he also discussed global market volatility, and the impact that Narayana Murthy’s return has had on company morale. Excerpts:
What do you attribute this “reasonably good” result to, and why have you refrained from revising guidance?
The fact is that when we started the quarter we said 6 to 10 per cent, which meant we have to do 0.5 per cent to 2 per cent every quarter to meet lower and upper end. We’ve done 3.7 per cent, which is better, which we are saying is reasonably good.
But we can’t forget the environment we are operating in… discretionary spend is not looking good, there’s regulatory overhang, and currency volatility.
That’s the reason we didn’t even consider revising our guidance. If things go better, we’ll have much more clarity to do so by the next quarter.
Is a part of this riding on the back of a sliding rupee?
The revenue growth is not impacted by the rupee at all. In fact, I have lost about 13.7 million dollars of revenue because of cross-currency movements.
The thing is that the volatility is across the world, and yes, almost 98 per cent of our revenues come from outside India. The kind of currency volatility we’ve seen in the last quarter, we haven’t seen in a long time. If you look at the US data, it seems to be looking much better – their housing and macro-environment parameters… so the yields are going up, a lot of FI money going back to the U.S. resulting in dollar strengthening and that translates into their economic growth. But this is not resulting in clients doing better, so it hasn’t translated into a better scene for us.
Are the attrition figures this quarter a cause for worry; were the wage hikes announced last month an attempt to arrest this trend?
Usually, attrition is high in the first quarter. We would have preferred to keep it under 15 per cent. It’s a cause of worry if we lose high performers or niche skills; but that has not happened.
It’s our policy to let go of low-performers. Attrition at the high performer level has been well below the average. We had to give the wage hikes.
People had not got hikes for two years, and inflation itself is very high so the wage hikes were due.
Have you on-boarded those who were made offers on campus last year?
The campus offers that we released in the previous year will be joining us now. Even this year’s hires (about 3,000) have been given joining dates, and we’ll take them on by December this year.
Is Infosys’ still focussed on its 3.0 strategy?
It’s still part of our focus. The thing is ‘products and platforms’ requires clients to look at IP-based solutions to change their technology platforms… today with discretionary spend coming down the market is not ready.
So, in the near-term, we are focussing on the bread and butter, because that’s what the market is offering. But in the long-term, we absolutely have to break this linearity between revenues and employee growth.
We have to look at a more scaleable revenue model. So, it is important to look at this focus in the long-term.
How has Mr. Murthy’s return impacted Infosys' approach to business strategy? Has he managed to boost employee morale?
From an employee perspective, we had had two years of underperformance compared to the industry. And employees are concerned about the company’s prospects, so to that extent they are very happy with his return, and his taking a re-look at what went wrong.
He also understood what they wanted with the wage hike, so he said we’ll give the hike and take a hit on the margins if need be…so in that sense it’s given them a higher morale.
Business strategy-wise, it’s too early to comment… it’s just been six weeks.