Indian outsourcing companies continue to report robust growth, in spite of fears that a stronger Indian rupee might hurt profits.

India's second largest outsourcing company, Infosys Technologies, said that its operating margins improved in the quarter to 30 September, even though the US dollar suffered against the rupee. Infosys’ revenue for the quarter was $1bn (£490m), up 37% from the same period last year. Profits grew to $271m (£133m) during the quarter.

The company said annual revenue would grow by up to 35%, reaching $4.2bn (£2.1bn) for the fiscal year to 31 March 2008. The company added over 4,500 employees during the quarter, taking the total number of employees to 80,500.

The rupee has appreciated by about 12% against the dollar since the beginning of this year. Indian companies collect much of their revenue in US dollars, but pay rising Indian staff costs in rupees.

The US is the largest market for Indian outsourcers, accounting for about 66% of export revenue.

Mid-sized outsourcing company iGate Global Solutions reported that its profits for the quarter grew by 127% year-on-year, to 229m rupees (£2.9m).

The company was able to contain the impact of the rupee's appreciation against the US dollar by a combination of currency hedging and cost cutting, including moving more work to India where the margins are higher, said N Ramachandran, chief financial officer of iGate. About 78% of the work was done in India during the quarter, up 6% on last year.

The company's 2bn rupee revenue represented a slight dip from revenue in the same quarter last year, largely due to a delay in receiving orders and also because of the impact of the crisis in the US sub prime mortgage market.

"In February and March, we redeployed about 80 to 100 staff that were working on this [sub-prime mortgage] business," Ramachandran said.

Both Infosys and iGate said they had been able to negotiate better prices from customers. To counter the impact of the rupee's growing strength, Indian outsourcers are trying to cut costs by increasing the number of people they hire from universities. The current mix is moving in favour of campus hires rather than hiring from the industry, said Amitabh Das, chief executive officer at Vati Consulting, a recruitment firm in Bangalore.

India's largest outsourcer, Tata Consultancy Services (TCS), is scheduled to report its results for the quarter on Monday, but company executives said earlier that the rupee appreciation would not impact their business significantly.

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