Re depreciation to offset margin impact: Infosys...

V. Balakrishnan, CFO, Infosys feels that there could be an impact seen on reported dollar numbers. He believes that it is too early to speculate on the missing dollar guidance numbers. He said that the rupee depreciation will offset the margin impact. However, the pricing environment is still fine, he said.

Balakrishnan said that 30% of revenues from other currencies have depreciated against the dollar. The reported dollar numbers will be impacted due to depreciation in other currencies.

Meanwhile, CLSA has said that Infosys FY09 US dollar revenue growth guidance should be cut to 17-19%, reports CNBC-TV18 quoting NewsWire18. CLSA also said that Infosys will most likely miss Q2, FY09 US dollar revenue growth guidance.

Excerpts from CNBC-TV18’s exclusive interview with V Balakrishnan:

Q: Is this true that because of the dollar’s appreciation against the pound, your profits might come under pressure this quarter?

A: The other currency is depreciative by close to 10% against dollar that could have some impact on the reported dollar number, not on the constant currency number. Margin impact is okay because the rupee also depreciated against the dollar and that could offset some of the impact. The impact could be more on the reported dollar number than on the constant currency number.

Q: Are you likely to miss your dollar guidance numbers for Q2?

A: It is too early to speculate on all that. There will be an update given at the appropriate time if there is anything. Right now, I don’t think so.

Q: There are some concerns being raised by CLSA that the full year guidance maybe in question, would you want to respond to whether or not that might be under review?

A: These are all speculative comments. We will wait and see how the currency behaves and if there is an impact, an update will be given.

Q: What will be the actual billing rate because of the change in these currencies? Is there scale back in that usually?

A: We have to see the billing rate. We have not seen any pressure on pricing here as yet. The pricing might be stable and we have not seen any instances where client’s have come and asked for large price cuts.

Q: How has the dollar/euro and the dollar/pound equations, which have got skewed in the last few days affecting your reported numbers?

A: We have close to around 30% of the revenue coming from other currencies all of them have depreciated early against the dollar. Pound selling for example is depreciative of close to 10%. So, when you reconvert for US GAAP reporting in dollar, the dollar equivalent would be less because of depreciation of those currencies against the dollar. But if you take constant currencies, it is still okay but it is too early to speculate on what kind of impact it will have.

Q: Have you done any kind of analysis on taking into account the dollar/euro and the dollar/pound and the rupee’s depreciation against the dollar and net-net how much of that can be balanced-off?

A: It is a question of average rate and the constant rate. So, we have to see how the currencies are going to behave for this quarter to get some kind of a view on the impact.

Q: You have guided rupee at about 43 to the dollar. It is now trading at 45.5 to a dollar or more than that, will that cause the review of the guidance?

A: We normally guide in dollars. We try to take the rupee rate close to the quarter guiding for future. So, that will continue and whatever the rupee rate is at the end of the quarter will be taken for future guidance.

Q: The Dow Jones is said to have quoted an Infosys executive saying that numbers could be impacted because of the dollar/pound depreciation? What exactly was that statement just in case they got it wrong?

A: You have said that the reported dollar number should get impacted because the other currencies are depreciated against the dollar. Whether we are going to miss the guidance or what is the level of impact is all speculative. I don’t want to comment on it at this point of time.

Q: The CLSA report has also said that apparently 28% of your invoices are nominated in Great Britain Pound (GBP) or euro, is that true?

A: GBP, euro and dollar all three of them.

Q: Is it likely that you can mitigate all the margin impact because of cross impact of all the currencies for this quarter?

A: Margin is okay. The rupee has depreciated as in the dollar by close to 12-13%. So margin is okay, we have to see impact of the reported dollar number.

Q: Any other issues, which has cropped up in the US in the last few week in terms of any other clients?

A: The environment still continues to be challenging, negative news keep coming up in the US. So, that has to settle down at some point of time. Till that time, confidence level of the customers could be low.