Buyback was never under consideration: Infosys

IT bellwether Infosys expects its operating margin to move in a band of 50 to 100 basis points for the fiscal year ending March, Chief Financial Officer V Balakrishnan said on Thursday.

The company's first-quarter operating margin fell 100 basis points to 29.9%. "The margin decline has been on the back on visa and employee costs," Balakrishnan told CNBC-TV18.

Infosys, India's No.2 software services exporter, cut its sales outlook for this fiscal year amid worries clients will reduce spending on outsourcing services due to global economic uncertainty, sending its shares down 10%.

The company was expected to cut its US dollar revenue guidance following the sharp depreciation in rupee to the dollar. But it shocked the street with a forecast of just 5% growth in USD revenue growth for the full year, sharply lower than its earlier guidance of 8-10% growth.  It now expects its USD revenue will be at least USD 7.34 billion this year.

In another surprise move, Infosys has not provided guidance for the second quarter, citing an unclear client spend environment. “We have had sporadic price negotiations from clients in the first quarter,” said SD Shibulal, MD & CEO of Infosys, adding “will start giving quarterly guidance when situation stabilises”.

Shibulal said lack of confidence among clients remains the key issue.

In the first quarter, its USD revenue rose 5% to USD 1.75 billion, which was also lower than its own and street forecast of USD 1.77 billion. The Infosys management expects quarterly movement in revenue to remain volatile ahead.

Infosys said it expects sales in the fiscal year ending March 2013 to grow by 5% to USD 7.34 billion, below its estimate in April of 8-10% growth.

Though the company exceeded its revenues forecast in rupee terms, it failed to meet dollar revenue guidance of USD 1,771 million to USD 1,789 million for the quarter. It had expected its rupee revenues to be in the range of Rs 9,011 crore and Rs 9,100 crore for April-June 2012. “We have lost USD 13 million on currency fluctuation,” the Infy top brass said. 

Shibulal said the company has not incorporated any wage hike in Infosys for now.  "We will revisit the decision to give wage hikes if any in October," he said.

Meanwhile, speculation about Infosys' Rs 2,000 crore buyback plan can be put to rest as the management dismissed all rumours and said that the share buyback was never on the cards.

However, the company stressed the importance of inorganic growth and said it is still scouting for acquisitions.

Below is the edited transcript of the interview.

Q: You have suspended the second quarter guidance, is it a permanent suspension of the quarterly guidance from here on?

Shibulal: Let me start with the current quarter. Given the environment, I believe that we have done fairly well. On year on year basis, our dollar revenue has gone up by 4.8%. We have met the EPS guidance. Our volume has grown up by 2.7% and we have added number of new clients this quarter. If you look at the current quarter revenue, in constant currency terms we achieved USD 1.78 billion.

We had two events; firstly we lost USD 13 million because of the currency. We took a one time write-off of accrued revenue as a matter of prudence on a large transformational program, which got cancelled this quarter in Europe. So that is another USD 15 million. Our revenue ended up at USD 1.752 million. This is a one time event and the client is still with us. In constant currency terms we have degrown by 0.4% and that is where the revenue ended up.

If you look at many of the other areas from a strategic direction we are doing well. We have added 10 new clients in products and platform; we had four large deal wins this quarter. One of them is above USD 300 million. We had four transformational wins this quarter. Overall from a strategic perspective we are executing or building tomorrow’s enterprise in a very difficult environment. We have made the choices, we believe it is a marathon, it is not a sprint but we are executing to that strategy very clearly.

Now coming to the guidance, we are definitely live in a very volatile environment, look at the US for example, look at the consumer confidence has come down again and also look at the Europe. Between April and today, if you look at the events, which have unfolded, we could not have predicted many of those events sitting in April especially in the financial industry.

In the Gartner report the IT spending growth has been cut down to some 3.1% to 1.3%, if you look at the TPI index 35% of the large deals have been taken off the table in Q1. In fact if you look at a billion dollar plus, it is 85% of the deals have atleast been delayed. So, we are definitely in a very uncertain environment. Hence for the time being we have taken a decision to give away yearly guidance atleast 5% growth for the year and not have a quarterly guidance for the time being.

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Q: Why don’t you disband the yearly guidance as well because it appears that it is a much clouded environment, if you cannot see the quarter ahead how can you see the three quarters ahead?

Shibulal: Our business model is very relationship oriented. We get 94% of our revenue from repeat business, 65% is our visibility for the year. In the beginning of the year we clearly know that what our visibility is for the year given our conversation with our clients, looking at our pipeline, looking at the stability of pricing which we see. Pricing has gone down this quarter because of portfolio shift and other matters. We believe at this point we can at least grow by 5% and it is prudent for us to talk about.

Q: This cut down in the yearly dollar revenue guidance from 8-10% to at least 5%, how much of it is because of cross currency and how much of it is because of lower volume growth visibility?

Shibulal: In this quarter the volumes went up by 2.7% - some of it has not reflected in the revenue because of cross currency as well as some of the transitions which are going on. I would think that 2% of that – the gap is between 8% and 5%, so 2% of that is because of cross currency movement and remaining is because of business environment.

Q: I heard you say that you had guided for an EBIT margin decline of 200 bps and you have delivered that. But isn’t the phase of huge change in the rupee dollar. So you cannot hide behind that. There have been reasons for EBIT margin decline. So that rationale of you doing along guided lines does not hold at all?

Balakrishnan: Rupee has depreciated by something around 9.7% quarter on quarter. If you assume net inflow of 40% you have a benefit of 40 bps for every 1% change that means margins should have gown by around 4.2%. But, we have seen pricing decline of around 3.7%, in constant currency terms it’s around 3.1%.

Pricing is a function of portfolio. If you look at the portfolio business the CSI proportion has come down by 1-1.5% this quarter. So, portfolio wise we have seen a change in pricing and that has compensated by the rupee depreciation – rest of the investment still happened. We had some 700 people onsite in US, we spent more money on Visas this quarter – those are plan. If you look at the planned basis we had met the operating margin guidance for the quarter.

 I also want to answer the other two questions you raised; one is on the guidance. We give guidance because we do not want any asymmetry of information between what we know and what the market know. If you look at the clients’ budgets today we have fair amount of certainty on the yearly spending. We have greater visibility into spending because we have a long term relationship.

The challenge is a quarterly movement because today client readjust the spending depending on what they see in the environment. They do not cancel projects. They defer projects. The decision making is slowed down. To that extent,  there will be volatility between quarters that is what is difficult to predict.

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But if you look at the longer term business for the year the budgets are there, clients are saying that they are going to spend. We have greater degree of certainty in that. If you look at the guidance of minimum 5% i.e. 6% in constant currency there is around 3% growth for rest of the three quarters I think it is achievable. We are clear that we will be able to make it and that’s why we gave a guidance of at least 5%.

Q: Yet you have scaled down your full year guidance between what you said 3 months back and what you are saying now?

Balakrishnan: We had given a guidance of 8-10% in the beginning of the year. Now we are talking about at least 5%. There is a 1% impact because of constant currency but if you look at the volume growth, the 8-10% growth at a higher end assumed a volume growth of 10%.

So at 5% growth level if we assume the pricing decline because we assume the 4% decline to remain for the rest of the year that is how the guidance is. So, you are talking about again a 9.5% volume growth. On volume growth terms there is no reduction in guidance. It is because of pricing change what we saw in the first quarter that is impacting the full year guidance.

Q: That’s an alarming statistic; Bala is saying that you should assume that 4% pricing decline for the rest of the year. So it is not a one off, it is a trend then you are seeing in pricing?

Shibulal: On the pricing front we believe that at this point in time the pricing is stable. There are two factors, number one the portfolio shift. So, Bala is assuming that the portfolio shift is going to continue for the rest of the year.

Q: Net-net it means pricing will decline whichever way you slice it.

Shibulal: No and also we are definitely seeing some sporadic pricing renegotiation than discount demands. So that is very clear because we are not seeing wide spread pricing renegotiations.

Our consulting system integration which is of higher revenue productivity is actually stable from a pricing perspective. But in the portfolio changes you will see decline in the revenue productivity. So the volumes are going up but the revenue will lag behind.

Q: I’ll ask you bluntly, because of the poor environment are you finally beginning to make pricing compromises?

Shibulal: Please remember pricing is always a portfolio approach. Good environment, bad environment you have to look at pricing as a portfolio. If you have a strategic client which is giving you USD 300 million of revenue, when there is a pricing discussion it is a different discussion. There is always a portfolio approach to pricing.

It is not that every client is at the same price, it is not that every service is at the same place, same price. One has to look at its portfolio and we have always looked it as a portfolio, we will look at the service, we will look at the client and take a decision. On a deal by deal basis the unit which is running the pricing has full flexibility to make pricing decisions.

At a company level, we believe that our revenue should be high quality; we should have a good balance between different kinds of revenue. So if you look at our strategic direction of building tomorrow’s enterprise and Infosys 3.0, it is all about creating this balance. On one end, you have the consulting system integration which is high revenue productivity. Today it is 29%, but our aspiration is to take it to one third of revenue.

On the other end, you have the products and platform business which we believe is non lenient, very high revenue productivity and it is growing. We are investing; we are also constantly looking at inorganic growth in that space. We have to balance the portfolio to get companies objective but pricing is a portfolio.

Balakrishnan: Also in environment like this consulting and system integration is more discretionary, that is where you will see some impact. Even this quarter if you look the regular bread and butter, development, maintenance, that has grown. So in environment like this you are going to see some larger impact on discretionary spending and that is what is reflected in the first quarter number and we always assume that will continue for the rest of the year.

Q: What are you assuming in your margin projection for the rest of the year in terms of the pricing decline and utilization?

Balakrishnan: Utilization could remain somewhere between 69-71% because you are talking about 5% growth and we are also adding people, we are adding 35000 people this year. Of course 13000 of that are related to BPO, but still we are adding people.

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So utilization could be there at the 70-73% level but for pricing as I said earlier, we assume the same pricing for rest of the year. It is like rupee, we take a rupee rate which is the closing rate for the quarter; assume that to remain for the rest of the year.

Q: So down 3.7% assumption?

Balakrishnan: Yes, whatever we have seen the decline for Q1, we assume that will continue for the rest of the year.

Q: Any wage hikes that you are pricing in at this point into the margin calculation?

Balakrishnan: No, we are not baked in any wage increases, but we do have given some 20,000 promotions and progressions across the company effective from July 1, that has been taken into account.

Q: No rethink on wage hikes at all because of the environment?

Shibulal: The first one is that we have done the promotions and progressions as we talked last time, we have done 20,000 across the corporations. If you look at 2008-2009 we had looked at the wage hike in the middle of the year. We will revisit the wage hike as usual in the middle of the year.

Q: In September?

Shibulal: In October.

Q: You are still keeping the window open for the possibility?

Shibulal: Yes, we are still keeping the window open for the possibility.

Q: There have been rumours last few days about a possible buyback; was that in the consideration radar at all in the board meeting?

Balakrishnan: No. For us cash is very important as we said earlier, we are focusing on Infosys 3.0, there is a greater focus on product platform solution kind of business. We are seriously looking at acquisitions, if we find any good strategic fit, we want to use a cash to grow that part of the business to meet our overall corporate objective.

Buyback is a last in the line, probably even if we want to return it, it maybe a dividend like what we have done in the past few years. But the primary use of cash could be for some strategic acquisition to meet our corporate objective.

Q: Your investors understand that the environment is tough right now and to that extent, companies like you are getting affected, what they are not happy about is that probably you are losing market share, because some of your larger peers are not showing up the same pain in the quarterly results, is it an industry specific slowdown or is it a company specific slowdown?

Shibulal: It is important to understand that you cannot do different things and expect same results. We have taken a path, which we have articulated. We believe that we have to build the balanced portfolio which is more relevant to our clients and that is the way to be successful in the medium-term to long-term.

It is very important to look at the portfolio; we have 30% of business coming from discretionary spend which will get impacted high more than normal in a difficult environment. We are investing into products and platforms. Our dependency on the financial service is 34%. Our overlap between financial services and consulting system integration are actually very low.

If you look at the environment, you have 35% of the revenue is coming from an industry which is going through turmoil. You have 30% of the revenue coming from a consulting and system integration space, which is discretionary spend which gets impacted more in this kind of an environment, which is 64% of the revenue. One has to factor in these factors. But we clearly believe that we are on the right path because for us this is a marathon, not a sprint. You will hit some bumps on the way; especially you are in the game ahead.

We believe that we have to continue execution on our strategic direction, build a balanced portfolio, which will have a substantial part of consulting and system integration work which is high quality, high revenue productivity and substantial part of products and platform work. That is the way we believe we will create sustained quality growth in the medium-term to long-term. But it is a different path, we have made a choice, so in the short-term, the results will be different based on a different path.

Q: How will you qualify short-term? You have had a few quarters of pain and it’s a matter of patience with investors or people who watch your company. How long is the period of pain?

Shibulal: Please remember, we have taken up this time in probably one of the most difficult times to do. I clearly believe that there is no good time and bad time for transformation. Companies who don’t transform cannot exist in the long-term. What worked yesterday is not going to work for tomorrow. We could not have taken a view that we are going to wait for the good times to come before we start the transformation.

We are going through this transformation in a very, very difficult time. The environment does impact a business which is so large. So, there is a dependency on the environment which you have to factor in. There is definitely a different path which we have taken. In my mind the environment is very difficult to predict. You hear numbers between 4 to 8 quarters for it to get back to at least some sense of normalcy.

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Anchor: Eight more quarters?

Shibulal: No the environment, I am not talking about Infosys, I am talking about the environment.

Anchor: I meant the environment, eight more quarters?

Shibulal: If you look at the reports, you are talking about a prolonged recovery. It has been more of a volatile environment. It has been volatile quarter after quarter and the events are unfolding as we speak. But when I look at our strategic direction, I believe that it will yield results in the medium to long-term.

Q: Will you have to make more margin sacrifices you think if the environment remains like this for another 4 to 8 quarters?

Balakrishnan: No, I don’t think so. Even in this particular quarter, even though we have seen a decline of close to 4% in revenue productivity we still met the margins. Our aspiration always had been to get the best margin in the industry. I don’t think we are going to dilute it. But let’s be real. World is today in turmoil.

Nobody can predict how long that turmoil is going to remain. All the developed markets are going through downturn. UK is technically in a recession. US people are worried about the fiscal cliff which will happen in December. We are living in a very volatile world that is a reality and we are doing a large transformation, it is impacting us again along with the environment.

We are going through the process. We believe we have the right strategy; we are in the right direction. Once there is some stability we will come out as winners that is the whole point. It is all about long-term, it is not about short-term.  You can ask me what is short-term, what is long-term that nobody can tell you. Even you can’t tell us how long the European crisis is going to be there.

So we are preparing a model for growth. We want to have best portfolio of business. We believe that is the right thing to do in this industry and we are going in that path. If we execute the strategy well, we will differentiate ourselves, we will look much better than the whole industry.

Q: This one-time reversal that you have had. Why are these client specific issues popping up at regular intervals? A couple of quarters back it happened with another financial client. This time around it’s happened with a European utility. Why are you running into these client specifics? What exactly is going on with these individual large clients?

Shibulal: Please remember we run 6,000 programs and many of the large transformational programs are very, very complex. This is a client specific issue. It’s a one-time reversal and we did as a matter of prudence. We are still working with the clients. Only that contract has been terminated.

We have taken it as a matter of prudence to take that USD 15 million reversal. It’s a one-time event. We have a very strict management of critical risk programs. We have a high risk cell which looks at all the critical risk programs.

I cannot think of more than three or four critical risk programs at any point in time of 6,000 programs we run. We are very good in execution. It is a very disciplined way of looking at things. Once in a while you will have a specific issue with a client on a contract, it is not even a full client issue and it’s on a specific contract.

Q: What exactly is the problem with visibility? Are you seeing inability to scale up on part of your clients or are their budget freezes or indefinite kind of postponement of projects?

Shibulal: In simple terms it is lack of confidence. Our clients they are looking at the environment. All kinds of numbers I told you, you have the consumer confidence coming down, you have the European turmoil going up, and you have events happening in the financials industry which is totally unpredictable. All that impacts their ability to take decisions, there is lack of confidence.

Many of the things which they have planned, for example the financial industry was hoping that the housing market will come back, the mortgage industry will pick up, they were investing into it, that has not happened. There was a set of dates for regulatory compliance.

Those dates have been moved. Now there is a concern that more regulations are on the way. So. there is lack of confidence. When you have lack of confidence you postpone the decisions, you revisit your decisions and you delay your decisions and that is what is the environment is.

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Q: The one-off hit that you have taken can you tell us without mentioning names why it happened whether such problems can resurface in subsequent quarters?

Srinivas: Let me paint the picture of Europe, I will come to the specifics. Yes, the macro environment in Europe continues to be uncertain and challenging and there are no easy answers to fix that. Not withstanding that,if you take our client environment in Europe across sectors; financial services, manufacturing, energy utilities, retail, consumer packaged goods (CPG), they are reasonably steady at this point in time.

While there is a bit of slowness in decision making, but the IT budget spends, the outlay for the full year is still there. We continue to have traction in terms of pipeline, deals in transmission programs as well as outsourcing programs. There is a bit of vendor  consolidation happening in some sectors.

The specific event which happened during the quarter was one-off client event in the EU space, which is energy utilities in the continent. While I cannot talk specific to the client this was a large transmission programs and that’s why you see a bit of a massive swing.

In today’s context when we are handling large transmission programs for clients it is no longer like in the past as we were handling small programs where the blips were typically normalized because there is always an upside and downside. But, this one-off thing during the quarter has reflected on not only the CSI numbers but also the European numbers.

Q: This is a USD 100 million plus client?

Srinivas: No.

Q: I know that the client remains with you but could it also pop-up in subsequent quarters with this kind of write-back?

Srinivas: It all depends on the client environment and the specific client takes decision based on what they see. I cannot comment whether this will happen or not. But always look in the context that today we are handling larger transmission programs across sectors - Europe, US. In the last quarter we saw a significant upswing.

When you have large fixed price programs running you will definitely see upswings and in occasional cases you will see these blips. That is something we have to live with because that’s the nature of the business we are in especially when we are handling large transmission programs.

Q: The other disappointment has been 3.7% cut in blended pricing, can you explain why that happened and whether as Mr Balakrishnan was suggesting that should be taken as the norm for the rest of the year?

Pradhan: Most of it is because of reasons other than secular Master Service Agreement (MSA) pricing. There is a portfolio shift, there are currency movements, they all have baked into that and at the end of it you sort of get a consolidated price decline. An MSA price decline, which is what drives the long-term pricing. We have seen pressure on it but it is fairly spotty, I wouldn’t call that a trend yet that we are overly worried about.

Q: Are clients coming back because of the environment to you and asking for pricing discounts?

Pradhan: No, it is not like post financial crisis when there were clients in serious trouble themselves then they would come back and ask for price cuts because of that. But it is more because there is competition. When there is competition, right clients will obviously try to take advantage of that.

This is one of the reasons why the company’s strategy is to go towards differentiation. The less the differentiation, the more pricing pressure you will get, that is true about any product, any service. So, we need to therefore push our products and services towards more differentiation and which is the strategy that Mr Shibulal and everyone has been talking about.

Q: Has the market because of the very sticky environment become more price sensitive because you have always been a premium price player, to get market share in this kind of an environment in a very price sensitive market, is it getting difficult?

Pradhan: If you say price sensitivity that is what we saw after the crash, the dot com bubble crash, after the financial crisis. That is when clients come to us and says we are in trouble and we just want you to take a price cut that is price sensitivity.

What you are seeing in the market now is client seeing a competitive environment. On services that carry less differentiation they are taking advantage of that like anybody would do, in any market, any sort of customers would do that. I am not going to say that there is higher price sensitivity. It is simply a matter of services on which there is a lot more competition that is less differentiated, clients take advantage of that.

Q: How is the products market holding out in the midst of this kind of global sluggishness?

Purohit: We continue to see a strong uptick in our Infosys Edge suite of platforms and products. We added ten more clients; we are now currently working with the total contract value of USD 380 million. Our Cloud business is also seeing significant traction going into, we currently have engagements across more than 150 clients working with more than 3,000 Cloud experts.

The Enterprise Mobility business has seen significant traction; we have got ten additional wins last quarter. We are currently working with more than 60 customers across different areas. What is more important is that in all of these areas, we are seeing that we are engaging in some of the core changes or transformations our clients are going through.

For example, if you talk about a large hi-tech company in the US, we are changing the way they completely deal with the internal employee environment using our platform which is a social edge platform. Incidentally, social edge platform now has more than ten clients, which is what we have always been working towards saying each of our products and platform should have more and more client option and should see a high uptick.

For example, in Cloud we are working with a large North American manufacturing major and completely helping them transition to the private Cloud as well as use big data, analytics and so in these areas of products, platforms, big data, Cloud, mobility, we are seeing strong uptake going into the quarter.

Q: What about BPO in terms of whether you have witnessed any kind of pricing pressure too in the BPO side?

Swaminathan: Yes surely there is pricing pressure in the bottom end of the pyramid. But we have significantly moved from the bottom end to the top end. We have actually changed the name of the game from being very transactional to being very transformational.

It has been a good quarter, we have grown 22% year on year because of the fact that we have actually moved from being transactional to transformational we are also able to hold on to our margins.

Q: Margins are stable between quarters?

Swaminathan: Yes margins are stable infact they have actually moved up few percentage points up because of the fact that our value based service offering are now resonating well with the clients. We are also moving quite significantly, not being very India centric today. We have more centers outside India than in India. Over 35% of our revenue is actually coming from centers based outside India.

It is not really in some sense outsourcing or off shoring, it is really right sourcing that we are really dealing with our clients. In many ways clients are seeing two distinct values. One is our ability to actually help them to move to newer markets with much more agility. If they have a market, if we have a product, if they have a customer, they just go there and we are able to make sure that the back office is really up and running.

We are helping clients to grow the top lines and bottom lines. The model itself is completely changed. That’s why we are reasonable bullish about what we are going to be able to do this year compared to the previous year.

Q: What is going on with BFSI, that’s down 1% this quarter sequentially? Are you seeing a lot of project cancellations or delay in ramp-ups there?

Srinivas: The financial services sector is definitely going through challenging times. In this context definitely there is a lot of pressure internally within the sector to reduce cost. The revenue top line is definitely not going up. So, there is a lot of pressure on margins. There are lots of initiatives with in the banks, within the capital market segments to look at, to rationalize on the pricing both IT as well as operations.

There are couple of things they are doing, one is they are looking at vendor consolidation, that’s an effort which continues both in US and in Europe particularly. If you look at other markets like Australia, they are looking at increase of off shoring as means to reduce cost. This trend will continue for the coming year for sure.

The other area which they are definitely looking at is they are definitely hit with lot of new regulations. They have to implement new processes and systems and controls and they have to find money to budget to make sure that they are able to put these new systems in place.

Again that is putting a pressure on run the bank applications tool to knock cost off, so that they can fund these new programs. That’s an area where Infosys has made investment in terms of building frameworks to help them put these new systems in place at cost which are much more competitive.

Q: When do you think this will kick in in terms of some kind of an upside kicker, this adoption of new process and systems which you can capitalize on even in a difficult environment?

Srinivas: If you look at the rate at which the costs are coming under pressure, there is definitely the cost take out is much larger on the volume terms as compared to the investments into these new areas. It will take couple of quarters for this to come in, but you will already see that happening because otherwise the ramp down would have been even more significant.

We are able to hold foot in a reasonably steady state given the fact that there is on one hand cost take out, which means no new large programs are kicking in. At the same time there are new investments happening which means some rampups. So we have to balance that and we have to make sure that the volumes continue.

Even in BFSI we are seeing some volume movement upward. There is some movement, but overall in the bigger scheme of things there is a lot of pressure on taking cost out. You will see that in the coming quarters as well. To off set that we’ll have to make sure on the steady state business, application services, infrastructure management where we are seeing traction and opportunities in BPO. We should compute these numbers together, compete and win and that’s what we are doing.

Q: You have seen downturns in the past. Does this have a feel of a cyclical downturn of three-four quarters after which things will get back on track or has something structurally changed which might set you back by two-two-and-a-half years?

Pradhan: It does feel like if it is a cycle the top of it seem to be long extended period of time. It also seems like the cycles are correlated around the world. After the financial crises we saw emerging markets carrying the world on its shoulder for a while, China was booming at that time and now it’s a large size economy by itself.

Now everything seems to be correlated at the bottom. You can see the US economy, Europe is what it is and the emerging markets aren’t contributing and it reflects in our guidance at this point in time. To us it looks like we don’t see when this can pickup again. So, we have to go with the outlook that we can see right now.

Q: Do you think this sluggishness can last beyond this year and take you further into FY14 because right now to predict a turnaround might be a matter of hope rather than conviction?

Srinivas: It also depends on some client specific opportunities. Overall there is sluggishness definitely if we are able to win some of these large outsourcing programs and on the investments on the client centric applications, regulatory applications we should be able to hold the revenue study. We should be able to see an uptake if some of the large deal wins happen. That is definitely a possibility even in current challenging times.

Q: Are there any possibilities that you are explaining on the inorganic front because there is no give back of the cash that you are sitting on. Are you finding any attractive proposition that you are pursuing?

Swaminathan: The inorganic growth is key part of our strategy. If you wind back we have done three acquisitions in the last six years. So there is a dedicated team in BPO which continues to look at and scan opportunities. As we speak we continue to look at opportunities.

Wherever we believe that there is proposition which is going to enable us to bridge a gap in the service offerings and get us into a newer market much faster, those are the kind of deals that we are bullish about. But any transaction which just gives us more of the same and adds to our topline is something that we are staying away from because organically we can grow that practice or a business quite efficiently.

Q: In your products and platform space is the higher value-added end getting squeezed more because of the inability to do a lot of discretionary spent at this point?

Purohit: The construct of the product and platform business is since its intellectual property led so that’s why it is not a function of any rate structure. But what is more important is to understand what are the kinds of functionalities and capabilities that you are bringing in. Whether you bring in with your own intellectual assets or you bring it with partner intellectual asset or with acquired intellectual assets over time.

Hence this is more importantly a game where the value that you realize is a function of the quality and stability of the intellectual asset and the roadmap of that intellectual asset overtime. That’s why when we look at this business our objective is to create more and more robust as well as highly relevant intellectual assets. Value is a function of the quality of the intellectual assets.