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Mr Nandan Nilekani, CEO, Infosys, at a press meet in Bangalore on Thursday.

BANGALORE April 10

INTENSE pricing pressure tracking increased competition and external uncertainties would continue to cramp growth for Infosys Technologies in the current fiscal.

A volume-driven revenue growth would be checked by rate squeeze, the company officials said. The company reported that prices for its services had come down by more than 5 per cent in March quarter from the preceding quarter, while its volumes grew about 12.8 per cent.

Mr Nandan Nilekani, President, CEO and Managing Director, Infosys, said, "While the pricing pressure continues to exist, the company is managing costs to meet the margin challenges."

Though revenue growth had been good during the year, there had been a decline in margins, he told a press conference.

"Margins had dropped to 25.4 per cent in Q4 from the levels of 30 per cent in the first quarter of the last financial year. This was because of factors such as pricing pressure and slowdown in the US," he said. The sales and marketing costs were also going up, besides the increase in taxes, he added. Sales, marketing and general administrative expenses increased by 57.5 per cent during the year to Rs 537.35 crore, over the previous year

"The uncertainties relating to the US economy continue to have an impact on the industry growth with longer sales cycles," Mr Nilekani said, adding that clients were consolidating their spends and looking out for partners with brand name and reliability.

The rupee's appreciation also was putting pressure on margins, said Mr Mohandas Pai, Chief Financial Officer. "We are proactively managing costs to maintain margins and are delighted to have a strong cash position," Mr Pai said. Infosys' cash and bank balances stood at Rs 1,336.23 crore at the end of the year.

To a question on whether the company would revise the guidance later as it did last year, Mr Nilekani said, "At this point of time, we are looking at both external factors and believe that this guidance is the best estimate for FY04. As we get more clarity, if there is any change we will be the first to come out and let you know."

Infosys's revenues ratio from onsite increased during the year at 54.7 per cent from 50.8 per cent in previous year.

"Onsite has gone up for multiple reasons, which include a large number of project starts in the previous quarter and growth in new services such as package implementation and consulting, which have a high onsite component," said Mr S.D. Shibulal, member of the board and head customer delivery.

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