‘Zero distance initiative and grassroots innovation have started to yield results’

Infosys CEO Vishal Sikka, COO UB Pravin Rao and new CFO Ranganath discuss how the company managed to have another quarter of ‘under promise-over deliver’ performance during the company’s third quarter earnings on Thursday.

How has the company managed third consecutive quarters of good performance?

Sikka: This we are doing by bringing the potential of humans and combine it with software and platforms.

A lot of credit has to go to Infoscions. In the past three weeks when I have been here, visiting development centres in the country, I am seeing confidence going up. There is more positive energy now. This was not the case a year or even six months back. In this quarter, a combination of factors helped us.

Our zero distance initiative (an initiative wherein all projects come up with value add) and grassroots innovation have started to create a positive atmosphere, which has resulted bringing innovation into every project.

This, along with new areas that we have been working on simultaneously such as AiKiDo, recent acquisitions like Panaya, Skava are all starting to yield results. If you put this in the backdrop of a seasonally weak quarter, coupled with the Chennai floods, we have done well.

On reduced margins this quarter...

Ranganath: Volatility in foreign exchange and a depreciating rupee impacted our operating margins resulting in operating profit being negative quarterly and annually.

Margins were down by 0.6 per cent but going forward, higher utilisation of employees and mix of onsite-offshore will help margins to go up.

Though we benefited from a weak rupee as non-operating income, it was offset by offshore costs and cross currency.

Impact of H-1B and L-1 visa hikes...

Ranganath: Currently, the way we understand the notification, it applies to new visas. As of now it is difficult to estimate but our sense is that it will have a 30-basis points impact on margins.

Sikka: Will continue to hire locally, as we have been doing in the near past. As I have mentioned earlier, this model of having to relying on visas has to change.

Won't local hiring impact margins...

Ranganath: There is a fair amount of parity in salaries now. It won't make that much of a difference.

On margins going down...

Ranganath: Margins were down by 0.6 per cent but going forward, higher utilisation of staff and mix of onsite-offshore will help margins go up.

On the deal pipeline...

Pravin Rao: Seeing a strong pipeline in financial services, Consumer Packaged Goods and retail. Oil and gas and telecom are difficult to predict. In oil and gas, there has been a further decrease in oil prices. We continue to expect volatility in the near future.

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