Search the Internet          Tips  Sites: Finance, Investment

Infosys to offer contract based discounts

K Giriprakash & Sanjay K Pillai

Infosys Technologies is offering 6 to 12 months discounts of 5 to 10 per cent to prospective clients on the contract size.

This means the company will offer discounts to its clients based on the size of the contract, i.e the larger the contract, the bigger the discount. Revenue for the first quarter of 2001 is around $123 million - $125 million, according to a top market analyst of company.

W R Hambrecht & Company in its market report has said Infosys has been giving higher discount for larger contracts. "In addition, Infosys is reducing discretionary spending and limiting salary increases in order to preserve profit margins," the report said.

It said Indian competitors are cutting bill rates in an effort to win applications maintenance contracts while large international service providers like the Big Five are aggressively pricing services in an effort to win application development work.

The report said the market analyst was reiterating its "buy" position on Infosys stock because of "improved visibility" as over the past four weeks to six weeks, Infosys has signed and closed five large contracts, four of which are for the US-based customers.

"This marks an improvement over the last quarter, when decisions on most large projects were deferred," the report said.

Infosys has forecast that it expects 30 per cent growth in revenues for 2001-02.

The report said projects typically started generating revenues within days of signing a contract, although it is not significant until after an initial ramp-up period of around two months.

It said demand for applications maintenance services was fairly constant, as such work must be done regardless of the macroeconomic environment.

"However, there is renewed interest in application development services, in which Indian service providers offer tremendous value proposition," the report said.

According to management, demand remains fairly weak in several industries, including brokerage, asset management, and telecommunication services.

Management did say, however, that demand from healthcare companies is solid, as is demand for outsourced research and development from telecom carriers.

"We remain optimistic about the investment opportunity because we expect incremental estimate increased over the next several quarters and remain enamoured with the company's long-term prospects," the report said.

The Nasdaq-listed Infosys Technologies posted a 94.5 per cent increase in net profit to Rs 1.82 billion for the fourth-quarter of 2000-01 even as its net profit for the entire fiscal surged by 114 per cent to Rs 6.29 billion compared with the previous year.

The board of directors of Infosys Technologies Ltd, scheduled to meet on July 10, 2001, will consider and take on record the unaudited financial results as per US GAAP and Indian GAAP for the first quarter ended June 30, 2001.

Powered by

YOU MAY ALSO WANT TO READ:
The Rediff-Business Standard Special
The Budget 2001-2002 Special
Money
Business News

Tell us what you think of this report