Bangalore: Infosys’ chief financial officer V. Balakrishnan spoke about customer confidence, technology spends and whether Indian software services firms will eventually benefit from the slowdown. Edited excerpts:
What are your customers telling you?
There are lot of things happening... Banks which are 100 years old are going bust. So, there is a crisis in confidence. That will have some impact on the IT spending because...the whole environment is impacted. That is why we are cautious. In the existing client portfolio, we are not seeing any big impact.
Low customer confidence will hit not just banking but also companies in other areas.
Lots happening: Infosys chief financial officer V. Balakrishnan at a press conference to announce the company’s second quarter results, held at the Infosys headquarters in Bangalore on Friday. Hemant Mishra / Mint
Ultimately it is not a financial services slowdown. Financial services are more visible, because some of the banks have gone bust due to lack of liquidity.
But overall, it is an economic issue. Because the consumer confidence is low, it is going to hit retail...; it is going to hit manufacturing.
You have indicated better prospects from Europe. What is the reason for this?
Europe, all along has been better off. But now, there are also...you see, Germany is going into a recession, UK is almost into recession. Having said that, Europe has not seen much of (work done) offshore.
In fact, adoption of offshore in the US is much higher than in Europe. (Also) the impact of (recession in) Europe is much lower than in the US.
Will more offshoring by European companies, and Asian companies cushion you from the slowdown in the US market?
Yes and no. Asia is less impacted but the US is the largest market in the world. Everybody will be impacted because (even) China is majorly dependent on the US. There are lot of opportunities in India, like any other market (but) we need to be selective. We are working with government agencies, bidding for some projects.
Japan is more inward looking, not focused on outsourcing. They are also realizing that if they are in the global market, they have to invest in technology. They are slowly opening up. So is India.
What are customers saying about next year’s technology budgets?
It is too early; nobody is talking about it. With too many things happening around you, next year’s Budget is the last thing (on anyone’s mind).
Lot of things are happening in the market, you have to see how to survive. You are seeing a 100-year-old institutions going bust in a day, you are seeing capital crunch everywhere.
If you are in an environment like this, you tend to be cautious—you don’t want to do stupid things. You sit tight on whatever you have.
Your receivables (amount to be received from companies) are down to 60 days.
Look we are very well focused, there are two things management sees every morning. One is how much cash we have in the bank and the second is what is the outstanding.
We have very tight control over that. Account receivables is around 60 days, but if you look at the quality of receivables—82% of it is less than 30 days. Ultimately cash is a matter of reality, and profit is a matter of opinion.
Will the Indian IT industry eventually benefit from the current economic slowdown in the US?
It will happen. Economic theory (says) when things are under pressure, you need to get value for money. You have to offshore.
We have seen the early signs in the current quarter (but) it is too early to call it a trend. It will happen after some time.