Infosys says playing safe in domestic market

Information technology (IT) services major Infosys has said its increasing focus on the domestic market wouldn't erode the company's margins. Its strategy of selectively taking up projects that require the deployment of products and platforms would help the company maintain its margins, it added.

In the past four quarters, Infosys' profit margin stood at 28-30 per cent, considered the highest in the industry.

"India is a unique market, where the acceptance of new technologies is very high, compared to the rest of the world. As the country has globalised more and more, there are a lot of opportunities in the private sector to adopt the best IT systems and benchmarks. But, if you take all kinds of deals in India, this would affect margins, which we have consciously avoided," said V Balakrishnan, chief financial officer and board member, who also oversees the company's India business.

He added this was the reason the company did not participate in many IT infrastructure outsourcing deals in the telecommunications space. India, he said, was a great market for high-margin products and the platforms business, in which returns were different from traditional IT outsourcing deals.

For instance, in the Income Tax Department project in which Infosys is managing the central processing centre for electronically processing income tax returns for five years, the company is being paid for every return processed. Infosys says the number of electronic tax filings would grow every year.

Last year, the processing centre accounted for about 12 million returns last year, and this year, the company expects this to rise to 20

million.

Infosys is also considering large-scale deployment of its products and platforms in India, owing to the size of the population here. One such project is the India Post contract, for which Infosys has been mandated to enable banking and insurance operations across all post offices.

"India Post is the largest government sector organisation in the country, with over 11,5,000 branches. We want to make it function like a banking and insurance company, for which we have to deploy our core Finacle product and the McCamish insurance platform across all branches. If you look at the scale and impact, it is huge and you can only do it in India," said Balakrishnan.

Compared to other Indian IT services companies, Infosys started focusing on the domestic market quite late, when it launched a separate business unit in 2008. However, the company has now set a goal to raise the revenue from India from $100 million to $1 billion.

"We are small now. We started our India unit only recently. But we are making a huge impact. I think in the next few years, India will be a very good growth engine for us," said Balakrishnan.

Among Indian IT services majors, TCS is said to be the only company for which revenue from India exceeds $1 billion.

The National Association of Software and Services Companies pegs the Indian domestic IT services market at $15 billion (Rs 78,600 crore), excluding the hardware market. Global technology giant IBM is said to be the leader in the Indian IT services market, followed by HP. Among Indian players, TCS, Wipro and HCL have significant exposure to the domestic market.