Infosys Technologies has announced its first quarter results. The company has reported consolidated net profit of Rs 1079 crore (including tax write back) in the first quarter of FY08 as against Rs 1,144 crore in the previous quarter, down 5.68%, which is above the market expectations.

According to the management the revenue has been impacted by Rs 287 crore due to rupee rise. "If you look at the quarter itself we have had a strong sequential growth at 7.5% on topline in the US gaap terms. We had 6.9% volume growth which is very strong" adds CEO & MD at Infosys, S Gopalakrishnan.

Margins impacted by Rupee appreciation:

Rupee appreciation has impacted the margins by 3.5% whereas EBITDA margins may be hit by 100-200 bps in FY08. In this quarter, revenues were impacted by Rs 287 crore because of the rupee appreciation but Inspite of it, the volume growth is still very strong at 6.9%.

Chief Financial Officer, V Balakrishnan says that the company should be able to maintain the margins in the narrow band compared to last year. He adds that the rupee guidance have been revised for the full year having lost Rs 287 crore in revenues of the first quarter due to rupee movement.

European portfolio growing up faster than the US portfolio:

"We grew in North America by about 7.5%, and in Europe by almost 8.5%. We have grown across all sectors whether it is BFSI, telecom, transportation,logistics, services, consulting, BPO and testing. So the growth actually is very broad" points Gopalakrishnan.

On the portfolio management front, the European portfolio has been growing up faster than the US portfolio and it has reached 26.8% this quarter. They have high margin or high revenue product to services for example consulting, which grew by almost 22% quarter on quarter, and is about 4.9% of the revenue, whereas package implementation is 18.4%. "So there are multiple services which we can manage to extract better value and revenue product from different clients so we actively do this to make sure that our revenue productivity goes up" he says.

Our guidance is based on our visibility :

The company also sees 9.3% growth in non top-10 clients and has added 35 new clients. They also add that any pricing increases would impact FY08 guidance positively."We are looking at 26,000 employees to be added for the year" adds Gopalakrishnan. The employee utilization, including trainees, is up 260 bps to 70.5% and the attrition rate is at 13.7%.

The management added that the wage cost is up 2.5% and the visa cost is up 1%. The offshore wages are up 12-15%, while the onsite wages are up 5-6%.

"We continue to try and extract value from our clients so you can see our revenue product has gone up quarter on quarter last year 5% and this quarter 1%". informs COO, S D Shibulal.

BPO margins down from 21-22% to 16-17%:

The earlier margins of 21-22% have come down to 16-17% margins in the BPO business, this quarter.The BPO has grown; the company added 2,000 people and lost 1,000 people, Mohandas Pai, Director, HR, informed.

The management said that appreciating rupee could significantly impact the BPO business. They added that the tax sops for BPOs should continue for the next 5 years.

Infy has already factored in a rupee exchange at 40.58. In the short-term, it sees rupee moving between USD 39-41. The appreciating rupee could significantly impact the company’s BPO business.

"BPO companies do not have a natural hedge in terms of foreign currency expenses, at least the IT industry has got some natural hedge because they have foreign currency expenses; so it is a big impact on BPO companies. I think there should be something done at that side, because a currency appreciation will have impact and looking at what is happening today in India, currency could appreciate further," Balakrishnan said.