DEPRECIATING RUPEE ALLOWED TO HIKE PROFIT
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DEPRECIATING RUPEE ALLOWED TO HIKE PROFIT

Sr Manager : Dgmatix

The earnings season for what was perhaps the most difficult quarter so far for most companies in recent years has kicked off with a pleasant surprise as India’s second -largest software exporter Infosys Technologies reported an unexpected 35.5% growth in revenues and a 33.3% rise in profits, from a year ago. Clearly, India’s bellwether IT Company has managed to ride out the rough sea. “In a challenging environment, our focus is on creating value for clients, running on optimized business, and evolving our business model that will allow us to emerge stronger when the global economy starts recovering,” said CEO & MD S Gopalakrishnan..

However, company’s operating margins during the quarter increased primarily due to a depreciation of the rupee .A depreciating rupee against the us dollar helped this major it service provider and exporter to marginally shore up its revenue and profit for the third quarter ending December 31 ,2008.

In the dollar terms the topline was 3.7% down. If smaller IT firms such as Mastek did not manage to escape the impact of economic turmoil and currency fluctuations as evident from its slower 16% growth in profit. So, how could market leaders- Infosys escape sluggish growth? Infosys cannot escape the impact of economic turmoil. It is the depreciation of rupee against the dollar, that has allowed Infosys to present a

rosy picture of Q3 results. Further, the cut in its Q4 guidance (in dollar terms), indicates

clearly that Infosys expects the deteriorating economic conditions to hurt its bottom line. Both revenues and profits improved operational efficiencies Addition of new clients

will be under pressure in 2009-10 and the growth in dollar earnings could be short of even 6-7%. It would face a challenging environment for the next 12 to 18 months.


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