Is Infosys on the Acquisition block?

Economic Times suggests in an article that Infosys is a very attractive acquisition target right now.  Look at some of the facts:Infosys has Cash and cash equivalents (Rs 22,000 crore) equal to 17% of the company's total market capitalisation of over Rs 1,34,000 crore - compared to TCS' ratio (Cash/Market Cap) of 2.2% and Cognizant's 12.5% With no debt burden and presence of cash reduces the enterprise value or the price that an acquirer would put on a going concern by an equal amount which w … [Read more...]

Indian IT companies headed for a rough future

Experts are predicting that the high profit margins experienced by the Indian IT companies will erode in the next 3-5 years.  And would settle at just around the 11-15% mark. Within the next two years, experts predict that operating margins will fall to below 20% (the average is 25% now for Infosys, TCS, Wipro and HCL Tech) and settle at a level that just about takes it past single digits. For comparison, in the quarter to September, the average operating profit margin for corporate India was … [Read more...]

Why Infosys doesn’t want government contracts in its portfolio

Infosys is changing course in its India business to focus more on deals from corporations rather than government, which now contributes about 90% to the company's revenue in its home market.The government takes a long time to finalise contracts and implementation cycles are long, adding to the pressure on Infosys, which is looking to make up for project delays and cancellations in its main markets — the US and Europe — from where it earns about 85% of its income.via TOI.  … [Read more...]

Visas, Margins, Costs and the Indian IT Companies: Need for a new Outsourcing Paradigm

H1-B worker visa numbers on offer by the US Government have come down over the years.  They are half of what they were at the peak just a few years back.  With the downturn in the US economy, this may go down further.Not just that, US Government has increased the cost of the visas and added a training premium, so that the cost of the visas is used to retrain the US workforce for the jobs in future.  From the US standpoint, it sounds fair - "If you want to come to our country then you pay for th … [Read more...]

Infosys Financial Results and its Future Contradictions

One is trying to understand Infosys and where it is going.  Honestly, I cannot make out the logic behind some of what is happening in there.  Read the following and contemplate:Lost a major transmission client in Europe (portfolio worth $15 mn) Pricing and Currency Fluctuations: Lost $13 mn on currency fluctuations (bad investment?).  While its rooting for the Indian Rupee to stay at INR 55 / $, the fall in Rupee is being offset by lower pricing.  So, clients are smart - they are factoring th … [Read more...]

Infosys in midst of Three-Phased Reorganization: Will it be a Game Changer?

Infosys is realigning itself. The entire realign work has been going on for last year or so. Broadly speaking there are 3 phases to it:1. Business Operations Restructuring: This has been completed. It affected roughly 55,000 people. Basically, in this phase the company's employees were aligned in Four Verticals: financial services and insurance; energy, utilities, communications and services; manufacturing; retail, CPG and life sciences.As per company leadership, this realignment has … [Read more...]

Why Fall of Indian IT Companies is imminent?

On a typical project done by an Indian IT company, the resources in India are charged at an average of $25-35/hr. Some years back it used to be $45, but it has steadily fallen. The other component are the resources from Indian practice working onsite. These resources are charged around $75-145 / hr - depending on which company it is. Then come the resources hired in US and residing in US. These come upwards of $100/hr. Except for the "Consulting practices" of WIPRO and Infosys, these … [Read more...]