Rising rupee to hit Infosys by Rs.20 billion


Bangalore : The Infosys Technologies Ltd will suffer a loss of Rs.20 billion in revenue this fiscal (2007-08) due to rupee appreciation, a top company official said here Thursday.

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“We have factored in a loss of Rs.20 billion in consolidated income and Rs.2.5 billion in net profit due to rupee appreciation for the entire fiscal at the current rate of Rs.39.50 per US dollar,” Infosys chief financial officer (CFO) V Balakrishnan told IANS.

“Although the currency appreciation may move both ways, any further rise in the rupee during the remaining two quarters of this fiscal may hit our annual revenue guidance despite hedging,” he added.

During the past 12 months, the rupee appreciated to Rs.39.92 from a high of Rs.44.98 per dollar. In the first six months of this fiscal, the rupee surged to Rs.39.50 at the end of September from Rs.43.10 in March.

Expressing hope the dollar would stabilise around Rs.39.40 despite volatility in the forex market, Balakrishnan said appreciation was not confined to Indian rupee alone, as was evident from similar trends in the currencies of South East Asian and Eastern European countries.

“In Brazil, the currency has doubled vis-à-vis the US dollar. No developing country is free from currency appreciation. One of the reasons for rupee appreciation is a huge inflow of dollars, which the Indian economy cannot absorb totally. Huge oil imports is another determining factor,” Balakrishnan pointed out.

To lessen the impact of a surging rupee, the IT bellwether has increased its currency exposure by $500 million from $900 million to $1.4 billion till September.

“We are proactively hedging our currency exposure to mitigate the impact of rupee appreciation. For the short-term, we will continue to hedge in the current range and review our hedging position if the rupee moves upwards. We are hoping the rupee will move both ways despite volatility,” Balakrishnan asserted.

Despite an appreciating rupee, the company has improved its operating margins by 250 basis points (2.5 percent) to 32.5 percent in the second quarter (July-Sep) from 30 percent in the previous quarter (April-June) of this fiscal.

Operating cash flows increased to Rs.11.44 billion during the quarter under review (Q2) from Rs.9.61 billion in the same period a year ago.

“Lower visa costs, increase in pricing by 1.9 percent and better utilisation rates have enabled us to maintain healthy operating and net margins in a competitive marketplace,” chief operating officer S.D. Shibulal said.

Chief executive officer and managing director S Gopalakrishnan said the company would be able to sustain double-digit growth despite a surging rupee by client acquisition and expansion of its service offerings.

“Although these are challenging times, we are on a strong foot to face competition and sustain growth through our global delivery model, which enables us to address the risk factors,” said Gopalakrishnan.

The company also shored up its cash reserves to a whopping Rs.73.19 billion ($1.85 billion) at the end of September, as against Rs.43.27 billion ($1.1 billion) a year ago.