Infosys' revenue growth slides to 5 percent as economy uncertain

The Indian outsourcer had posted revenue growth of 23 percent in the same quarter a year ago

Infosys' annual revenue growth tumbled to about 5 percent in U.S. dollar terms in the second quarter, down from the 23 percent revenue growth the company had posted in the same quarter last year, the company said on Thursday.

The company also lowered its revenue forecast for its fiscal year ending March 31, 2013 to a little over US$7 billion, for annual growth of 5 percent. Infosys said in April that it expected its revenue growth in the current fiscal year would be between 8 and 10 percent. Its revenue grew by 16 percent in the previous fiscal year.

India's second-largest outsourcer has been hit by the slow recovery in the U.S. and the debt crisis in Europe. The Indian economy has also slowed down with growth in gross domestic product down to 5.3 percent in the first quarter.

The market continues to be uncertain, said B.G. Srinivas, Infosys' head of Europe and global head of its financial services and insurance business. Infosys also saw slower revenue growth in the quarter because a large project in Europe got cancelled. Its dollar revenue grew slowly partly because of the appreciation of the dollar against the Euro and the U.K. pound in which the company earns a significant part of its revenue, Srinivas said. A few clients are also renegotiating contracts to cut costs.

The U.S. and Europe account for about 85 percent of the company's revenue.

The company reported revenue for the quarter was about $1.7 billion. Its net profit for the quarter was $416 million, up by about 8 percent from the same quarter last year.

Revenue growth in rupee terms in the quarter was far higher at 28.5 percent because of the sharp depreciation of the rupee against the dollar.

The uncertainty will continue as there is nothing really positive in the macro-economic indicators, Srinivas said. In some markets like the Nordic countries and Australia there is however new interest in offshoring, he added.

The market for outsourcing is sluggish and most Indian outsourcers are likely to report single-digit growth rates in the quarter, Sudin Apte , principal analyst and CEO of Offshore Insights, a research and advisory firm, said earlier this week.

Infosys has also been affected by customer uncertainty about a lawsuit relating to visas against the company in the U.S., said Jimit Arora , practice director at Everest Group.

Jay Palmer , an Infosys employee filed a lawsuit last year against Infosys, in which he alleged that he was harassed after refusing to help the company use B-1 visas, a business visitor visa, for work he claims needed an H-1B work visa. Infosys also said it was the target of a federal investigation in this connection.

The company has communicated its stand on the lawsuit to customers, and did not find an impact from the case on its U.S. business which has grown, Srinivas said.

Infosys added 1,157 staff in the quarter, and expects to slow down hiring this year in view of the business environment and because it already has sufficient delivery capacity, Srinivas said. The company had 151,151 staff at the end of the quarter. It will however continue to add experienced staff in markets like the U.S. and Europe.

Tata Consultancy Services, India's largest outsourcer, reports its earnings later on Thursday.

John Ribeiro covers outsourcing and general technology breaking news from India for The IDG News Service. Follow John on Twitter at @Johnribeiro. John's e-mail address is john_ribeiro@idg.com

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