Indian Outsourcers Thriving

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

India's second-largest outsourcing company, Infosys Technologies Ltd., said Thursday that its operating margins improved in the quarter ended Sept. 30, despite the rupee's strength against the U.S. dollar. Infosys said its revenue for the quarter was US$1 billion, up 37 percent from the same period last year. Profits grew by 36 percent to $271 million during the quarter.

The company said annual revenue will grow by up to 35 percent, reaching $4.16 billion to $4.17 billion for the fiscal year ending March 31, 2008. The company added 4,530 employees during the quarter, taking the total number of employees to 80,501 as of Sept. 30.

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

The U.S. is the largest market for Indian outsourcers, accounting for about 66 percent of export revenue.

Mid-size outsourcing company iGate Global Solutions Ltd. reported Wednesday that its profits for the quarter grew by 127 percent over the same quarter last year, to 229 million rupees (US$5.75 million on the closing date of the quarter).

The company was able to contain the impact of the rupee's appreciation against the U.S. 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 percent of the work was done in India during the quarter, compared to 72 percent in the same quarter last year.

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

"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 hires from universities. The current mix is moving in favor of campus hires rather than hiring from the industry, said Amitabh Das, chief executive officer of Vati Consulting Pvt. Ltd., a recruitment firm in Bangalore.

India's largest outsourcer Tata Consultancy Services Ltd. (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.