Infosys Technologies (INFY)

Infosys Technologies

Udayan

Welcome back. You are watching the Infosys Boardroom now. Over the last one and a half hours we have heard speculations, then informed you about the numbers, then analyzed them to the best of our ability, and I think all of that is in the realm of speculation, only the guys who have given you the guidance know best what lies ahead for FY06. So, we have got a packed house here for you like every year, and it is Nandan Nilekani, Mohandas Pai, S. Gopalakrishnan, and Basab Pradhan; full house, all members of the Infosys top management who will tell us why they have given Rs. 84 – 85 as the guidance for FY06. Good to see you all of you again, good morning.

First thing Nandan, why are the results on a holiday? Because the market has been speculating on whether you wanted to shield the market from a certain bit of news, any clues to that?

Nandan

No, not at all. You see we set our calendars for the long term, and you know we announce the date of all our results, you know, last April, and at that time we did not have holiday on this day, so we went ahead with this date. Believe me, we have no other purpose, and we don’t change these dates, we do them a year back.

Udayan

Sheer coincidence?

Nandan

Sheer coincidence.

Udayan

Okay.

Nandan

May be it has given more time to see our results.

Udayan

Absolutely, that does not mean             .

Your guidance, I think a lot of people have interpreted that as being quite conservative, because there were expectations it could be 30% plus, Rs. 90 odd per share. Have you been deliberately more conservative this time?

Nandan

No, I think as you look at our guidance you will see that our guidance for the first quarter is flat, and we do believe that customers are occupied with some of the compliance issues, in some of our customers there have been some organizational changes. So we expect the first quarter to be flat. So given that I think we are quite comfortable. I think 28-30% for the year, crossing $2 billion, I think that is a reasonable guidance.

Udayan

Markets of course spoilt by your performance this year, you said 20% when you began last year and you delivered 52%, that is a too big a gap on your bit, it tells the markets that you are overly conservative when you give out these guidance.

Nandan

No, I think we should take each year as it comes. Last year was I think a great year and we did close to 50% in dollar terms even though we said about 30% in dollar terms. But sitting here on April 14, 2005, we do believe that 28-30% in dollar term is a guidance that we are comfortable with.

Udayan

Mohan, good morning. The market also has been speculating on whether this Rs. 85 guidance factors in or bills in a lot of damage done by Fringe Benefit Tax. Have you considered that, what is the impact, and has it been one reason why your guidance is conservative?

Mohandas Pai

No, we have not considered Fringe Benefit Tax for the primary reason that the Finance Minister has gone on record to say that legitimate business expense will not be taxed, and we do not give any fringe benefits apart from superannuation, and we have gone through the law, we had sitting with the finance ministry, we have gone through law, there is only one item which could come within that ambit of 11 items that have been given, i.e. foreign tours and travel. Now we travel abroad, but we are in a very peculiar situation because we have permanent establishments outside, and all that travel that we do is linked to the permanent establishment outside, and we don’t think the Fringe Benefit Tax will impact that. We are in discussion with the government. We are encouraged with what the Finance Minister has said; and barring that one item the rest of the items are not issues at all. So, we are at this point of time not factoring in this issue. We will see what happens as time goes by.

Udayan

Even if it stays in its current shape it should not hurt your earnings any bit?

Mohandas Pai

It will not hurt our earnings except foreign tour and travel. Foreign tour and travel is 4%, and if you take 4% and if you apply the math that you see normally, even that is not going to be very much.

Udayan

Kris, volume growth for this quarter has been about 6 odd percent, is that right?

Kris

Yes.

Udayan

That being a little lower than the kind of run rate double digit growth that you have been seeing and Nandan saying that next quarter could also be flat itself. Any let down in the momentum of the volumes growth, because I have seen the good part of the story in the last four quarters?

Kris

As Nandan already said, we see a temporary slow down because of preoccupation with compliance, there have been some organizational changes, so we saw that in Q4, some of that is in Q1 also.

Udayan

What kind of compliance were you referring to?

Kris

The Sarbanes-Oxley compliance latest issue, especially in the financial services industry. So that is what we have factored in.

Udayan

We were reading a JP Morgan report, Basab, because it came in a couple of days back, and that talked about that there could be some slow down or in the ramp up of your top 20 clients. Have you seen anything like that at all on the ground?