Though the market is volatile, Infosys continues to hire, which according to Mr V. Balakrishnan, Chief Financial Officer, Infosys Ltd, is largely because clients are not cutting budgets.
In an interview to Business Line , Mr Balakrishnan discusses the reasons for a muted guidance as well as issue concerning the controversial visa case.
While you have met your guidance for the quarter, it is still not good enough. Do you think the environment will improve in the near future? You are hiring as well even though the market is volatile.
We are realistic and offer guidance based on what we see in the market. When the environment gets better, we will do better. Many think of our guidance as conservative, but today, our guidance is more realistic. Because of volatility, you can sit idle and do nothing, or look at the client budget and create capacity. We are hiring because nobody is cutting budgets. We cannot do just in time hiring when we get projects. If the market doesn't grow, it will hurt our margins and that's why our guidance is muted.
Due to the Infosys visa case, the company will be under more scrutiny. How do you plan to overcome this issue?
Whenever unemployment increases in any country, the focus on immigration is heightened. Nasscom has said that the rejection rate for visas has now touched 45 per cent. We have enough visas and in the long-term, we plan to hire more people in the US and localise our operations there. This year, we will be hiring 1,000 people in the US.
How has your business from the domestic market panned out? Also, transformational deals during the quarter were just three. Is it good enough?
India is extremely important for us. We have worked on a tax project, which is one of the largest in the country. We processed 85 lakh tax returns last year and this year, it will be around 1.5-2 crore. But India is a challenging market that wants the best technology at the lowest price. As far as transformation deals are concerned, considering the market situation, three is extremely good. Remember, transformational projects come as part of a client's discretionary spending and in a volatile environment like this, clients may not do discretionary spending.
Consulting has grown by 2.5 per cent this quarter compared to the same quarter last year. Did you expect more, or are you happy with this figure?
We are never happy with anything. We want to break linear growth so that we don't have to hire more and more people. That's why as a part of Infy 3.0, we want to look at one-third of our revenues each coming from transformation, IP and regular business.
What are your clients in the US and Europe saying?
We live in an uncertain world and all developed nations are grappling with structural issues like inflation and unemployment. In India, in spite of inflation, there is still growth, but in the US, this is not the case, so the government has cut spending and it affects growth. US corporates are sitting on $2 trillion, but they are worried about the environment and so they are not spending.
You had earlier indicated higher growth for Q2, but guidance indicates a lower 3-5 per cent growth.
This is because of lower utilisation. Our utilisation this quarter, including trainees, was 73 per cent, and we are adding another 12,000 people.