India's outsourcing industry continues to do well despite the appreciation of the Indian rupee against the US dollar and higher staff costs.
India's second largest outsourcer, Infosys Technologies, slightly increased its revenue forecast for its fiscal year to next 31March. The company expects revenue to grow by 29% to 31% during the year, to between $4 billion (£1.97bn) and $4.05bn. Infosys said in April that it expected revenue to grow by 28% to 30% to about $4bn during the year.
The company, which is listed both on Indian and US stock exchanges, lowered its revenue forecast in rupees, however, to take into account the appreciation of the rupee.
India's software and services exports are projected to grow by 26% to 29% in the fiscal year to next 31 March, to about $40bn, India's National Association of Software and Service Companies (NASSCOM) said this month. The country’s revenue from exports of software and services and business process outsourcing (BPO) grew 33% to $31.3bn in the fiscal year to last 31 March, NASSCOM said.
The appreciation of the rupee against the US dollar pushes down rupee realisations for revenue earned abroad by Indian companies, even as staff costs in India are going up. The US is the largest market for Indian outsourcers, accounting for about 66% of export revenue.
Indian outsourcing companies seem to be holding out well against the pressures.
Infosys, of Bangalore, has maintained its net margins despite the rupee appreciation, higher wages, and costs of visas to the US, the company said Wednesday, while announcing its results for the quarter ended 30 June.
iGATE Global Solutions, a mid-sized outsourcer in Bangalore, also said that it had nearly doubled its operating margins in the quarter from the same period last year, on account of higher rates from customers, higher utilisation rates and greater use of offshore delivery of services.
In the quarter ended 30 June, Infosys posted revenue of $928 million, up 41% over the same quarter last year. Profits were $263 million, up 51% from a year earlier, according to US generally accepted accounting principles.
The company added 35 new clients and 3,730 employees during the quarter, taking the total number of employees to 75,971. Infosys plans to hire 26,000 more staff during the current fiscal year.
Infosys and other Indian outsourcers compete with multinational services companies such as Accenture and IBM, which have set up offshore services delivery centres in India to take advantage of the lower cost of staff in the country.
There is enough business going around for both Indian and multinational companies, according to Indian outsourcers. The crunch comes in relation to hiring new staff. The company made no reference to rumours circulating earlier this month that it is looking to acquire rival French IT services firm, Capgemini.
Wipro, India’s third largest outsourcer, will announce its results for the quarter next week.