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Home > Business > Reuters > Report

Infosys facing all-round price pressure

May 20, 2003 14:08 IST

The Infosys campus in BangaloreIndian software giant Infosys Technologies Ltd said it was under pressure to lower prices as clients sought to cut costs and cut-rate rivals tried to corner business in a global economic slowdown.

Infosys, India's largest listed software exporter, sparked a sell-off in tech shares last month when it warned investors that its profit would grow by just 12-13 per cent this year, down from 18 per cent last year, hurt by sliding margins.

"Our clients, faced with increasing cost pressures, are requesting their vendor-partners to share the burden," Infosys said in its annual report for the year to March 2003, filed with the US Securities & Exchange Commission on Monday.

"Competitors, under pressure to source business and sustain operations, have taken short-term pricing measures."

Nasdaq-listed Infosys, a showpiece of India's software revolution, said developments linked to the Iraq war and the outbreak of SARS combined with increased visa restrictions and a stronger rupee had added to the past year's pressures.

The Indian rupee has already gained more than two per cent so far in 2003, breaching the key 47 per dollar mark on Monday to close at a near two-year high.

Analysts predict that the unit, quoted at 46.90/91 per dollar on Tuesday afternoon, will gain further this year.

Infosys' shares fell nearly seven per cent on Monday on talk that a large client was likely to negotiate lower rates, A spokeswoman for the company declined comment on the speculation.

The shares were up 2 per cent at Rs 2,845 on Tuesday afternoon.

The company, which earns about 70 per cent of its revenue from the United States, counts Bank of America and American Express among its main clients.

It now faces pressure from giants likes Accenture which are setting up shop in India.

Infosys, which employs more than 15,000 people, reported a revenue of $772 million last year and expects consolidated revenue, including that of its fledgling back-office services unit, to rise 24 to 26 per cent this year.



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