Infosys hedging more against stronger rupee

Updated on May 26, 2007 10:27 AM IST
The incoming CEO of Infosys Technologies Ltd, says it had recently increased its hedging against rupee appreciation.
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Reuters | ByAdam Tanner, Berkeley

The incoming CEO of Infosys Technologies Ltd., India's second-largest software exporter, said it had recently increased its hedging against rupee appreciation but that the profit impact of the currency strengthening remained uncertain.

S Gopalakrishnan, now president and COO, also told Reuters on Friday that Infosys was eyeing acquisitions as part of its expansion strategy, adding that when he takes over as CEO next month the company should move faster to take advantage of any opportunities.

He said due to a sustained rise in the rupee against the dollar, Infosys had further increased its hedging since the end of March, when it had $ 470 million worth of rupee hedges.

"It is much more than that," Gopalakrishnan said in an interview midway through a conference on Indian democracy at the University of California, Berkeley, though the ultimate impact on earnings remains uncertain due to continued rupee fluctuation.

"Our guidance is based on a fixed exchange rate of 43.1 per dollar," he said, noting the rupee now trades at about 40.59 per dollar. "We can't give guidance every day based on rupee ... it really is what the rupee is at the end of quarter."

The rupee has hit a nine-year record against the dollar, reducing revenue from abroad when translated into Infosys's reporting currency. Gopalakrishnan says a 1 percent rise in the rupee against the dollar impacts Infosys's earnings margin by about 45 basis points.

S Ramadorai, chief executive at rival Tata Consultancy Services Ltd., told the Reuters Global Technology, Media and Telecoms Summit this month his company was concerned that the rupee's rise against the dollar might dent revenue.

Gopalakrishnan said his company, which has 72,000 workers, was looking at buying smaller, solid companies that wanted to be acquired, but declined to give details.

"We are looking at acquisitions both to expand our services footprint as well as our geographical footprint," Gopalakrishnan said, adding the company's market in Europe, for example, was growing fast. "At any point in time we are in discussions and things like that."

Asked if there might be news of acquisitions in the coming months, he said: "It's like marriage, you cannot say until it happens."

Nasdaq-listed shares of the company rose 2.9 percent to $49.90, after its Mumbai stock rose 2.6 per cent.

A soft-spoken unassuming executive, Gopalakrishnan, 52, takes over as CEO on June 22, and said he did envision some changes in the company's approach.

"What will be different are based on the circumstances and the current circumstances require you to take advantage of these opportunities maybe faster," he said. "So we need to focus on this, become more competitive, increase productivity and become more business-oriented."

Infosys and rivals say it is now tougher to find qualified workers, even amid a flood of applicants. Gopalakrishnan said his company received 1.3 million job applications in the past 12 months and offered 30,000 people positions, of which 22,000 ended up working there.

The growth of tech centers such as Bangalore has also put tremendous pressure on India's neglected infrastructure.

"Theoretically, okay, the infrastructure has very little impact because the business depends on having very high-quality data communication lines," he said. "In practice employees still have to get home."

"It is tiring, it is frustrating, it's unproductive."

Gopalakrishnan said it can take him an hour and a half on bad days to commute from his home to the office in Bangalore.

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