Infosys Technologies, India's second largest software exporter, is gearing up for a long-term appreciation in the rupee's exchange value, but will manage the transition for now by asking its new and existing clients to increase billing rates, company chief executive officer and managing director S Gopalakrishnan said on Wednesday.
The company expects its new projects to be priced 3-4% higher than the current ones while also negotiating with existing customers for a 2-3% rise, he said.
"In the longer term, the rupee should appreciate because the Indian economy is growing faster than the global economy," he told reporters. Companies like Infosys will be able to take the knock if the rise is gradual and spread over time. "When there is a sharp rise in a short time, it becomes difficult to manage."
The rupee has appreciated nearly 11% against the US dollar in 2007 on top of a slower rise in the preceding three years. It has led to a shrinking of profit margins for exporting companies, especially software outsourcers which derive two-thirds of their revenue in dollar.
Besides the rupee, Infosys is also watching out for any slowdown in the US economy and the fallout of the subprime crisis, Mr Gopalakrishnan said. Though the company's exposure to subprime-related financial sector companies was less than 0.5%, Infosys is still in touch with its clients and analysts to gauge the depth of the crisis. Many of them are still assessing the potential damage of subprime woes on IT budgets, he said.
Infosys BPO, the business process unit, employs about 100 people and derives revenue of about $1 million from entities related to the subprime credit market.
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