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Infosys to review hedging policy — `Rupee volatility very high this quarter, we have to be slightly more active'

Our Bureau

Bangalore , Jan. 11

STUNG by the impact of the rupee volatility, Infosys may review its hedging policy. The company has hedged $300 million by taking range-bound options and has marked them to the market, said Mr T.V. Mohandas Pai, Chief Financial Officer.

"We have a good hedging policy. The volatility in the rupee movement was very high this quarter. We may have to review the way we do it and may have to become slightly more active," Mr Pai said. Infosys had increased cash and cash equivalents by Rs 555 crore to Rs 4,348 crore during the quarter after incurring a capital expenditure of Rs 260 crore. The company expects to spend Rs 1,180 crore on capital expenditure for the year of which Rs 850 crore has already been spent by the end of Q3.

Infosys, which sees a secular trend on the business side, does not foresee any dramatic increase in the IT budgets of its customers for 2006. The growth in IT budgets could be in single digits, Mr Nandan Nilekani, CEO, told analysts over earnings call. "Customers are expecting more and more from the technology providers," he said.

Infosys increased its million-dollar clients to 206 during the quarter by adding 15 new clients. The company's active client base stood at 454, while it added a total of 36 new customers. New clients accounted for 7 per cent of revenues, while repeat business accounted for 93 per cent.

Mr Kris Gopalakrishnan, Deputy Managing Director and COO, said the secular trend on the business side continues and the company is positive about the overall market. The two-year-old consulting business of Infosys was on track with around 200 employees and clocked revenues of $10 million in Q3 FY06 and is expected to earn $13 million in Q4.

"We had earlier said that we hope to break even in Q4 FY06 but we are in an active investment mode. If we accelerate investment and recruit aggressively, the break-even may be delayed," Mr Gopalakrishnan said. He added that the Chinese subsidiary was doing well and the revenues were on track.

To boost margins and productivity, Infosys is also betting on patents in areas such as wireless, media convergence and microchips in which intellectual property rights are also shared with clients. Infosys currently had some four patents and 24 patent applications had been filed, Mr Gopalakrishnan said. Further, the company has 85 preliminary disclosures for patents.

On the performance of the BPO subsidiary, Progeon, Mr Gopalakrishnan said that it clocked revenues of around $22 million during the quarter and was well on track to achieve the targeted $80 million for the year.

Infosys added that Mr Amitabh Chaudhry, currently the Chief Operating Officer of Progeon, would take over as the Managing Director and Chief Executive Officer of the BPO outfit from March 2, 2006. Mr Chaudhry will be replacing Mr Akshaya Bhargava, who has recently put in his papers.

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