Infosys Technologies Ltd. led Indian software exporters lower in Mumbai trading after the company reported profit unexpectedly fell and forecast billing rates will extend declines.

India’s second-largest provider of technology services fell 3.5 percent to 2,795.50 rupees as of 01:14 P.M. in Mumbai trading, leading the benchmark Sensitive Index lower. Industry leader Tata Consultancy Services Ltd. dropped 2.7 percent and Bangalore-based Wipro Ltd. declined 2 percent.
Chief Financial Officer V. Balakrishnan said today the company is cautious about the outlook on Europe and that the drop in billing rates will probably deepen to 2 percent this year. Infosys cut prices to retain and win business from European customers after the euro’s 6.3 percent decline against the rupee dragged down the value of sales in the region, which accounts for about 20 percent of Infosys’s business.
“Europe is definitely a concern,” said Jagannadham Thunuguntla, chief strategist at SMC Capitals Ltd. in New Delhi. While Infosys is among India’s best-run companies, “even they will come under pressure,” he said.
First-quarter net income fell 2.6 percent from a year earlier to 14.9 billion rupees ($318 million), Bangalore-based Infosys said today. Profit missed the 15.6 billion rupees average of 25 analyst estimates compiled by Bloomberg. Profit probably missed estimates because of higher-than-expected wage costs, said Nitin Padmanabhan, an analyst with Indiabulls Securities Ltd. in Mumbai.
The weakness of the euro, which has lost about 12 percent against the dollar this year, and ripples from the Greek debt crisis will result in a 12 to 15 percent loss in income for the Europe-based business of Indian information-technology vendors, according to estimates from Forrester Research Inc. in Cambridge, Massachusetts.
“If the euro trails at the same level -- or worse, drops even further -- then Indian companies may lose more than 20 percent on each European deal,” Sudin Apte, a Pune, India-based analyst at Forrester, wrote in a July 1 note to clients. “In a market that has shown success only in pockets, this economic challenge may make vendors lose their interest in the geography.”
Billing rates will likely fall 2 percent in the year ending March 2011 after they declined 1.6 percent in the first quarter, CFO Balakrishnan said.
Sales rose 13 percent to 62 billion rupees in the April-to- June quarter, from 54.7 billion rupees a year earlier, in line with the 62 billion rupees average of 28 analyst estimates. The software-services provider, which derived 66 percent of its revenue from companies in North America and 23 percent from Europe last fiscal year, added 38 clients and a net 1,026 employees during the quarter, for a total of 114,822 workers, it said in a statement.
(Source: Bloomberg)