Kolkata: India’s second biggest software exporter, Infosys Technologies Ltd, is evaluating potential acquisitions of non-US companies roughly one-tenth its size by revenue to shore up earnings from other geographies, chief executive and managing director S. Gopalakrishnan said.
The firm is also pursuing 12-15 business deals worth $1 billion (Rs4,770 crore) in the ongoing quarter, he said, signalling that momentum in technology spending by clients would continue. But he added that pricing would remain under pressure for some time.
Infosys has forecast that its revenue for the year to March 2010 would fall on demand for fee cuts by its overseas clients.
Wider focus: The Infosys campus in Bangalore. Companies such as Infosys, Tata Consultancy Services and Wipro have been expanding into new markets to reduce their dependence on the US. Madhu Kapparath / Mint
The firm is now looking to buy information technology (IT) firms in Europe, South America, Japan, West Asia and Australia that earn $450-500 million a year in revenue and cater to the healthcare and energy sectors, Gopalakrishnan said on Wednesday on the sidelines of a seminar organized by the Confederation of Indian Industry (CII), an industry lobby.
“We have a dedicated team looking at opportunities,” he said.
Many of Infosys’ clients are based in the recession-hit US, which accounted for 63% of its revenue in fiscal 2009. Europe came second, contributing to 26% of the firm’s revenue. Australia, Japan, West Asia and South America, which Infosys classifies in its financial statements as “Rest of the World”, contributed to 9% of its revenues.
“We want to increase the share of our global revenues from markets such as Europe and the Rest of the World,” Gopalakrishnan said, adding Infosys is looking to increase revenue from Europe and the other geographies to 30% each.
Companies such as Infosys, Tata Consultancy Services Ltd, India’s largest software exporter, and third-ranked Wipro Ltd have been expanding into new markets to reduce their dependence on the US.
Separately, Wipro chief financial officer Suresh Senapaty said the company was also looking at similar regions as Infosys for acquisitions.
“We are looking at companies with revenues of around $30 million, but there’s no upper cap,” he said, adding that Wipro was pursuing some outsourcing deals mostly in the government sector in India.
India’s software and services exports are seen rising 4-7% in the year to March 2010, sharply slower than the 16.3% they grew at in 2008-09, on sluggish demand for outsourcing services, the National Association of Software and Service Companies (Nasscom), an industry lobby, said last week.
Infosys shares jumped 2.49% to end Wednesday at Rs2,094.55 on the Bombay Stock Exchange, and Wipro’s stock went up 3.25% to Rs498.05, on a day the bourse’s benchmark index, Sensex, rose a mere 72.85 points to close at 15,903.83.
Gopalakrishnan also said that Infosys, which employs around 104,000 people, has “deferred” pay hikes and promotions this year to contain costs.
Staff costs accounted for 49.2% of Infosys’ expenses in fiscal 2009, a tad lower than in the previous year. Typically, the company announces pay hikes and promotions in April.
The company has, however, honoured job offers it made in April 2008 to some 18,000 engineering graduates, he added.
Reuters contributed to this story.