Infosys Technologies is likely to stage a better show in the current financial year. Thanks to the rewards offered to the software industry by the finance minister, Yashwant Sinha, in the budget.
In the budget, custom duty on imported computers has been reduced to five per cent from 12 per cent and that on colour monitors has been cut from 15 per cent to five per cent. Tarrif was also reduced from 10 per cent to five per cent for floppy disk drives, hard disk drive and CD-rom drive.
These sops are expected to increase the demand for computer softwares in the domestic market. At present, Infosys has a very negligible presence in the local market. Further, permission to offer stock option schemes to Indian employees linked to GDR/ADR issues will help the company to retain its best talents.
The company posted a good show in 1997-98. Its revenue earning, more than 80 per cent of which comes from exports mainly to the US, increased by more than 80 per cent. Income from software exports grew by more than 100 per cent from Rs 125.28 crore in 1996-97 to Rs 250,94 crore in 1997-98.
Operating profit of the company increased by more than 77 per cent compared with nearly a 48 per cent hike in the previous year. Though depreciation provision increased by more than 116 per cent due to zero interest burden, pre-tax profit of the company accelerated by over 69 per cent. Increase in depreciation was due to its new accounting policy adopted in 1995-96. The company has decided to provide depreciation on the computer systems and associated peripherals by taking its useful life in the band of two-five years. Lower tax provision further helped the company to record more than a 79 per cent growth in its profit after tax.
Being one of the early entrants in the industry, the company now stands among the top players in the Indian software industry. It has consistently been among the top 10 exporters of the country. It has softwares like DMAP, INLEGOE _ an architectural product, BANCS 2000 _ a bank automation project, to its credit.
Apart from BANCS 2000, all its products are for the overseas markets. But income from this software dipped nearly 50 per cent in 1997-98 over the previous year.
Though N R Narayan Murthy, chairman and managing director of the company, attributed the loss to sluggish banking activities resulted from the slowdown in the economy, some analysts feel otherwise. According to them, while it is a fact that there was a slowdown in the economy, it was also a reason for the banks being flushed with funds. The advances of SBI during 1997-98 grew in the region of 12 per cent as against a target of 17 per cent. In view of recent massive computerisation programmes undertaken by Indian banks, the fall in sales of a well known banking software of the company does match with the growth of the company.
During 1997-98, the contribution from Y2K software is 23 per cent and 59 per cent of sales accrues from offshore exports. Around 25 per cent of the companies software professionals are engaged in Y2K jobs.
Some of the analysts feel that when Y2K jobs will not be there, these professionals have to be sifted to other sections which may not be beneficial for the company. At present the manpower cost of the company accounted for almost 54 per cent of the total cost which is at the higher side of the industry norm.
