Infosys beats market estimates; net up 6.6%

Infosys, India’s second largest software exporter, posted a net income of Rs.34.6 billion rupees for the third quarter ended December, beating analysts’ estimates, and raised its annual sales growth guidance to between 8.9 percent and 9.3 per cent.

The Bengaluru-based company had earlier forecast full-year sales growth in dollar terms would range between 6.4 percent and 8.4 per cent. A Bloomberg survey of 25 analysts estimated net income of 33.5 billion rupees. Infosys shares rose 4.3 per cent to Rs.1,128.70 on the BSE.

Total revenue for the October-December period was Rs. 15,902 crore registering a growth of 15.3 per cent when compared with the year earlier period. The operating profit was Rs.3,959 crore, an increase of 7.3 per cent.

“We have done well in a quarter considered tough due to furloughs, holidays or less working days and headwinds in a few verticals such as energy, manufacturing and telecom while retail was soft,” said Vishal Sikka, CEO and MD, Infosys.

The net profit increased sequentially by 0.9 per cent and stood at $524 million for the quarter ended December 31, 2015. Infosys registered revenue of $2,407 million in Q3 up 12.5 per cent in constant currency terms. On a quarter-on-quarter basis, the company’s volume witnessed a growth of 3.1 per cent. “The healthy volume growth this quarter has been encouraging,” said U.B. Pravin Rao, president & COO, Infosys. “The lesser working days and our investments into additional trainees resulted in softer pricing and utilization for the quarter.” Market analysts believe that Infosys is back on the growth path again. “We are expecting to get back to industry leading growth in FY 17,” said Mr. Sikka.

“The management reiterated its outlook of industry leading growth in FY17, and considering the pickup in deal wins, strong volume momentum, traction in top accounts, we believe that it remains on track to deliver on that target,” said Ashish Chopra, VP – Research, at Motilal Oswal Securities Ltd. During the quarter ended December, the company added about 75 new clients taking the active number of clients to 1,045. The company also made a gross addition of 14,027 people in the quarter taking the total number of employees to 1,93,383 as on December 31, 2015. On a standalone basis, the company’s attrition rate declined to 13.4 per cent.

On a geographical basis Infosys major market North America declined by 0.6 per cent, while Europe grew by 2.1 per cent. In industry segment financial services and insurance grew 2.7 per cent, while manufacturing witnessed a decline of 3.7 per cent.

“We believe that newer initiatives like zero distance, design thinking, automation, etc will shore up the growth rates of Infosys and sustain margins over the longer term,” said, Dipen Shah, Senior Vice-President at Kotak Securities.

Infosys said the recent H1B visa fee hike may have less than 0.3 per cent impact on its margins.

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IT sector worried; India to take up visa fee with U.S.

India will soon schedule discussions with the U.S. to raise its concerns over the Obama administration’s recent decision to hike visa fees, official sources told The Hindu. India will also consider retaliatory measures and even explore the possibility of dragging the U.S. to the World Trade Organisation’s dispute settlement body, but only if talks fail to amicably resolve the issue.

Issues related to the tightening of the visa and immigration regime and the fear-mongering about a large number of American jobs allegedly going to foreigners have been part of the rhetoric before elections in the U.S. This time too, it is no different.

Industry bodies FICCI and Nasscom had termed America’s decision — to double the fees for certain categories of H1B and L1 visas to $4,000 and $4,500 respectively — as “discriminatory” because it will mainly impact Indian IT firms. Nasscom said the decision’s financial implications for the Indian technology sector would be around $400 million a year.

H1B and L1 visas are temporary work visas for skilled professionals. India is the largest user of H1B visas (67.4 per cent of the total 161,369 H1B visas issued in FY14 went to Indians) and is also among the largest users of L1 visas (Indians received 28.2 per cent of the 71,513 L1 visas issued in FY14).

President Barack Obama had recently signed into law a $1.8-trillion tax and spending Bill. Among other things, it authorised the visa fee hike applicable to companies employing 50 or more, and with over 50 per cent of their employees in the U.S. on H1B and L1 visas (or the 50/50 rule).

The fee thus collected, likely to be over $1 billion every year, will be utilised to finance a biometric tracking system and healthcare requirements of the 9/11 terror attack victims. The firms mostly affected by the 50/50 rule are those from the IT/ITeS sector, the largest users of the H1B and L1 visas. However, trade experts, speaking on condition of anonymity, said that to successfully challenge the fee increase before the WTO panel, India will have to first establish how Indian companies are more affected than those from other countries.

But before any action at the WTO, discussions on the issue will be held shortly over digital videoconference between both governments. These discussions will be part of the high-level India-US Services Working Group meetings, the sources said.

Commerce Minister Nirmala Sitharaman is likely soon to write to U.S. Commerce Secretary Penny Pritzker. The sources said the Indian Ambassador to the U.S. and industry bodies such as Nasscom are in touch with the U.S. administration to put across India’s view — the “huge” contribution of the Indian IT firms to the U.S. economy, as well as the adverse impact of the visa fee increase on these firms and on the temporary movement of highly-skilled professionals, mainly from the IT sector, from India to the U.S.

Pointing out that U.S. visa fee increases hurt India-US services trade, the Indian Commerce Ministry has been insisting that all visa-related issues should be part of discussions on bilateral services trade, the India-US Trade Policy Forum (or TPF, the premier bilateral platform to discuss and resolve bilateral trade and investment issues) and the India-US Strategic and Commercial Dialogue (S&CD, the primary forum to discuss issues of mutual interest on regional security, trade, economic cooperation, defence and climate challenges).

During 2014-15, India’s export of computer services and ITES/BPO services (excluding commercial presence) was around $82 billion, of which exports to the U.S. and Canada accounted for nearly 60 per cent.

The sources said the U.S. Commerce Department and the U.S. Trade Representative have informed that visa-related matters should be kept out of the TPF, S&CD and services discussions as, according to the U.S., they are security-related issues dealt by the Department of State and Department of Homeland Security.

Meanwhile, the Commerce Ministry, along with the External Affairs Ministry, are in discussions to ensure that the digital videoconference on visa-related issues happens some time soon, especially since the TPF and S&CD, both annual events, will now be held only in September-October 2016. With the presidential elections scheduled for November 2016, India is looking to resolve the issue before the term of the Obama administration ends, the sources said.

India had earlier protested the delay “on the part of the U.S.” in signing a localisation agreement to eliminate dual social security taxation. The Indian IT/ITeS sector is already burdened because in the absence of an India-U.S. Totalisation Agreement, it has to shell out over $1 billion annually to the U.S. government towards social security, with no benefit (as the Indian employees do not stay on in America) or prospects of refund.

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Obama signs Omnibus spending bill into law; raises H1B visa fee

U.S. President Barack Obama on Saturday signed into law a USD 1.8 trillion spending package which among other things introduces a hefty USD 4,000 fee for certain categories of H-1B visa and USD 4,500 for L1 visa.

The law comes as a shock for the Indian IT companies as they would have to pay millions of dollars while applying for H-1B visas, as they heavily rely on this work visa for highly skilled IT workers to get their work done in the U.S.

Indian IT companies have termed it as highly discriminatory and punitive as the text of the legislation has been written in such a way that such a high fee would have to be paid by only major Indian IT companies.

Companies having more than 50 employees and having more than 50 per cent of their US employees on H-1B and L1 visas would have to pay the new fee when the next visa application session kicks off on April 1, 2016.

This year’s Congressional approved quota of 65,000 H-1B visas was filled up in the first few days of the start of the application process on April 1.

In fact the U.S. government had to resort to a computerized draw of lots as it received several times the quota of 65,000.

The ‘Consolidated Appropriations Act 2016’ signed into law by Obama, includes a USD 1.1 trillion omnibus spending bill that funds the government until September 30, 2016, as well as a USD 680 billion tax package.

Among other things, the new law makes US aid to Pakistan more stringent by asking the secretaries of state and defense to certify that Islamabad is taking actions against terrorist networks and meeting other conditions.

But the provision of a national interest waiver nullifies such conditionals.

The law also paves the way for the implementation of the long pending IMF Quota and Governance Reforms.

Approved and passed by the IMF in 2010, it could not be implemented because the Congress had not passed it.

IMF Managing Director Christine Laggard said the adoption of legislation by the U.S. Congress to authorize the 2010 Quota and Governance Reforms is a welcome and crucial step forward that will strengthen the IMF in its role of supporting global financial stability.

US Treasury Secretary Jacob Lew said essential to this legislation are the IMF quota and governance reforms.

“The IMF has promoted stability, jobs and growth for the past 70 years, and these reforms will strengthen the US leadership position in this critical institution, while putting the Fund on a strong financial footing,” he said.

“Along with passage of Trade Promotion Authority and the conclusion of the negotiations on the Trans-Pacific Partnership trade agreement this year, the IMF reforms reinforce the central leadership role of the United States in the global economic system and demonstrate our commitment to maintaining that position,” Mr. Lew said.

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