 Brokerages being irrationally exuberant on IT: InfosysPublished on Thu, Aug 27, 2009 at 09:46 | Source : CNBC-TV18 Updated at Fri, Aug 28, 2009 at 10:55 116833 Investors following Infosys. Share this News with them.
Just when many brokerages are in the process of re-rating the IT sector and there is talk of recovery in the export-dependent, beleaguered Indian IT industry, Infosys says pricing pressures remain and customers are still struggling with their IT budgets. In an interview to CNBC-TV18, V Balakrishnan, the bellwether's Chief Financial Officer, said the brokerage reports talking about the IT sector's recovery was 'irrational exuberance'. Infosys, which along with other IT biggies Wipro, TCS, IBM and Accenture, bagged a joint USD 1.5 billion deal for an outsourcing project from British oil major BP, said revenues from BP may be higher from post the deal. Infosys, however, would not change its guidance for now, he said. Here is a verbatim transcript of the exclusive interview with V Balakrishnan on CNBC-TV18. Also watch the accompanying video. Q: Have things improved materially on the ground because a lot of brokerages are getting excited again saying the worst is over and there will be material improvements-what can you share with us on the kind of improvement that you are seeing on the ground? A: I don't think things have materially changed on the ground. If you look at customers, they are still struggling with growth, with spending. Underlying pricing pressures are still there. Of course there is some optimism because all the macro indicators are pointing towards a recovery. So there is some confidence in the system. But it has not translated to incremental business on the ground. I saw some of the reports coming out from research houses; some of them are exhibiting some kind of irrational exuberance which is not reflective of what is happening in the environment. It is too early to say that things have change and we are back to the normal kind of stuff. It is going to take time, there is some confidence in the system but it's not reflecting on the ground in terms of IT spending. Q: It's interesting that you are calling it irrational exuberance, which part of it is irrational according to you-all that talk of IT budgets having started to flow once again or the fact that pricing discounts are thing of the past and you are seeing much better traction in terms of pricing? A: Some of them are painting pictures as if everything has come back to normal-it is not so. Customers are still struggling with their IT budget-there is still lot of focus on conserving cash. Even if they have the budget, they are not spending to the full extend. So all those have not changed; the pricing pressure has come down to some extent because people are much more confident now but the underlying pressure still continues. So it's too early to say things have changed and we are back to a normal kind of growth that is what I call as irrational exuberance. Q: We understand the BP deal is USD 1.5 billion. How exactly has this been apportioned amongst all the winners which is you, Wipro, TCS and IBM? A: There is no number to it. BP is one of the top ten clients for us; we have been having a long-term relationship with them. They have done some kind of vendor consolidation and we have been chosen as one of the preferred vendor. What that means is, we have retained our position and we are one of the preferred vendors for BP and we will have a share in all the new projects or spending that comes in. It's very difficult to put a number to it. Continued on Page 2...
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