Size not an issue for acquisitions

Was it surprising for you that analysts expected Infosys to miss its guidance?

I think the environment is so bad that people think the impact will be larger on us.

Also, most of them have not understood the (impact of ) of currency movements. One of the reasons the reported revenue numbers in dollar terms is lesser is because of cross currency movements. They always talked about missing the guidance, but they did not understand, it is because of currency movements.

Then, do you say your business model is better to battle tough times?

We have always said that, we have a better variable cost structure, better financial model, in tough times it will help us to overcome any impact. It has proven again in this tough quarter, the volume was 2%, the environment is bad and the pricing came down by 1.8% sequentially based on constant currency. But we have still been able to maintain margins. I think we have better cost structure, more variable that will help us to maintain margins in tough times like these. We have made the right investments in training, creating solutions, consulting and that will help us position in the market to grow faster. And the third is cash, which gives us a lot of comfort in an environment like this, to invest in right assets, make sure growth is continued and also comfort in business, not only to all stakeholders. Look at any angle — we are well positioned to perform better in any environment

With cash reserves of $1.98 billion, what are the options, would you look a payback to shareholders?

There is always a balancing we do. Certain amount of money we need for us to run the business, need for strategic purposes for acquisitions, for investments internally. There is certain return of expectations from business, which we have always stated. We have to balance all the three. At some point of time, if we believe that we have cash in excess, we are willing to return to the shareholders, we have already done two or three times. At the same time, there are enough opportunities in the market to acquire and we are pursuing that. If any good strategic assets come our way, we will use that cash.

What could be the size of acquisitions you would make?

We are looking at filling the gaps — either in geography or in some vertical or bring in IPRs. It depends on nature of the asset. If you remember Axon, we were ready to pay $800 million. So, I think as long as the asset is strategic, as long as you can afford it, size, I dont think, is an issue.

Would you look at cross currency hedging, considering the impact this quarter?

We are already doing it. Now around 10-15% is cross currency. I think we need to do more.

How much?

Our exposure to non dollar currencies is 28%, we have to make sure that we cover that exposure.

Would you see a trade off in growth for Infosys in its bid for higher margins?

I don’t think there is trade off between margins and growth. Margin is something we are focused on, I think we need quality growth. We are willing to walk away from deals that are not okay for us, either in rates or margins.

Infosys has said the pain would continue in the next 12 months. Can we see you doing more work offshore to overcome that challenge?

It could happen, you have seen this quarter offshore volumes increase, and a small decrease in onsite. It could happen, when clients look for value for money, it is natural for them to work offshore more. That is why we keep saying; offshore players are better prepared and well placed than global players in an environment like this.

Even though, they have huge offshore presence?

Doesn’t matter, because they are using it as a defensive strategy than an offensive strategy. It is not an integrated model. Offshore players are much better placed.

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