Infosys has issued a guidance of 7-9 per cent for the 2015 fiscal year, lower than trade body Nasscom’s estimate of 13-15 per cent for the industry. In a conversation with Business Line, Infosys CFO Rajiv Bansal asserted that this is the ‘right’ guidance. He believes the company can continue to maintain its operating margins at 24 per cent and also sees further improvement in employee utilisation.
You have issued a guidance that is conservative at a time when your peers are optimistic about higher revenue growth this fiscal year. Is it a strategy to promise less and deliver more?
As Shibulal (Infosys CEO) has indicated, our guidance is a statement of facts. At any point in time, we look at all the factors and then come to a decision. This guidance is based on analysis and the business opportunities on hand. Our business is a momentum-based business.
In the third and especially the fourth quarter, we saw a bit of a decline, and going ahead, a lot depends on how we have exited fiscal year 2014. This aspect will have to be given weightage.
So, I would say that our guidance is based on all of these factors; I would not agree that this is either aggressive or conservative guidance.
Among some of the positives, Infosys has seen an improvement in operating margins. Can you maintain them at the level that you did in FY14?
Our operating margins have gone up 0.5 per cent (50 basis points) to 25.5 per cent compared to the third quarter. Also, if you were to look back a few quarters, our margins dropped to 23.5 per cent. We had to do something and accordingly had to resort to cost efficiencies and manage it carefully. There was a tight leash on wage costs and sales and marketing expenses. We had to cut flab, work efficiently and at the same time reinvest in our sales engine, technology and people.
We are confident that we will maintain operating margins at 24 per cent in fiscal year 2015.
The rupee is expected to strengthen versus the dollar, especially if there is a positive election outcome. How much could this hurt margins?
In the near term, the strengthening rupee will definitely hit margins. If you look at the way the rupee has moved, it strengthened to ₹40 in 2007-08 and went down all the way up to ₹68 last year. But ours or the industry’s margin profile has not changed much and has remained in a narrow band.
We cannot go to customers and renegotiate a contract if the rupee goes either way. I think over the long-term, the rupee will have less of a role to play in margins.
Your employee utilisation has been going up over the last few quarters. Are you comfortable with the 78 per cent level, going forward?
No, this is below our target. We are looking at employee utilisation levels of 80-82 per cent.