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Murthy concerned over decline in Infosys' growth

March 13, 2014 17:47 IST

Murthy concerned over decline in Infosys' growth

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Expressing ‘great concern’ over declining revenue growth, Infosys Executive Chairman N R Narayana Murthy said the rate of growth declined 77 per cent during March 2011 to March 2013.

The Infosys co-founder, who was brought back to head the firm in June last year, also expressed unhappiness over the laggard performance in the last two years.

"Under normal circumstances, our operating margin should have been 41.5 per cent. But it ended up as 23.5 per cent as of date and that means it is a drop of approximately 45 per cent.

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Image: N R Narayana Murthy.
Photographs: Reuters

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"Therefore, revenue growth went down by 77 per cent and margin growth went down by 45 per cent during the period March 31 2011 to March 31 2013.

“These are matters of great concern for us," he told investors at a Barclays meet.

The rupee was about 44 per dollar as of March 31, 2011, moving to around 54-55 as of March 31, 2013 and went further down to 62 in September last year.

"About 48 per cent of our revenue gets translated to rupee and given that there was a devaluation of about 25 per cent in the Rupee-Dollar exchange rate, we should have added approximately 12 per cent to our operating margin," he said.

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Image: Infosys' earlier board of directors.
Photographs: Courtesy, Infosys
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Murthy concerned over decline in Infosys' growth

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He also pointed that the decline in operating margin from 29.5 per cent in FY'11 to 23.5 per cent for the current year is also a cause of concern.

Referring to the movement in Rupee-Dollar exchange rate from 44 to 62 in the last two years, Murthy said the company should have added approximately 12 per cent to its operating margin.

"We are not very happy with our performance over the last two years in the financial year 2012, 2013.

“Our growth rate was about 5.8 per cent compared to the 11 per cent for the Indian software industry," Murthy said.

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Image: An employee walks past a signage board in the Infosys campus at the Electronics City IT district in Bengaluru.
Photographs: Vivek Prakash/Reuters
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For the ongoing fiscal, which closes on March 31 this year, Infosys expects revenue growth to be somewhere between 11.5 per cent and 12 per cent.

Stressing that there is ‘absolutely nothing wrong’ with its Infosys 3.0 strategy, Murthy accepted that the company could have ‘done a better job in executing that strategy’.

As part of the Infosys 3.0 strategy, the country's second largest software firm intended to focus on transformational projects, new solutions like cloud computing and mobility as well as enhance focus on products, platforms and solutions.

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Image: N R Narayana Murthy.
Photographs: Reuters
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Murthy concerned over decline in Infosys' growth

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He added that Infosys has set about an action plan to move towards better growth rate and better margins.

Infosys CEO and MD SD Shibulal said he expects sluggish growth in January-March quarter due to muted client spending, especially in retail and may spill over to 2014-15 fiscal.

Reacting to this, the firm's shares made a weak opening at the BSE and further plunged 9 per cent to Rs 3,340.      

Its shares fell by 8.54 per cent to close at Rs 3,357.50 apiece on the BSE on Thursday.


Image: Infosys office.
Photographs: Reuters

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