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BPO Journal

Thursday, January 12, 2006

Lofty Expectations

In quarterly results posted yesterday, Infosys Technologies reported reported a 28% increase in net profit. Revenue was $559 million, up 32%. A separate statement, based on Indian accounting standards, said quarterly revenue grew 35% and net profit rose 31% from the year-earlier period. Yet, the company's American depositary shares fell $7.58, or 9.4%, to $73.06 as the result was below Wall Street expectations. That triggered Infosys's stock price to fall 4.7% Thursday in Mumbai trading.

This illustrates the lofty expectations that accompany the bright outlook for India's IT services sector. Add to this, significant wage inflation, a squeeze for human talent, a strengthening currency, and emerging low-cost outsourcing alternatives, and you have the recipe for a volatile 2006.

And who better to articulate the sentiment than a fund manager himself. In a recent article in the European Wall Street Journal, Pradeep Kumar, an investment manager at the Chola Mutual Fund in Mumbai contended, "The companies must maintain at least 30% revenue growth. Anything less, and I would consider the stocks expensive."

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