New deals bolster Infosys profits

Infosys is one of the "big three" Indian outsourcers

Indian outsourcing firm Infosys has seen a sharp rise in profits after winning a batch of new business and opening operations in lower-cost areas.

Third-quarter profits rose from $225m to $319m (£156m) while sales rose 37% to $1.02bn as Infosys signed up 48 new clients, mainly from Europe and the US.

Indian outsourcers have been opening facilities across Eastern Europe and in China to drive their business forward.

But Infosys' shares fell as analysts expressed concerns about future sales.

They closed down 7.5% at 1,966 rupees in trading in Bombay.

"The net profit growth is almost in line with expectations, but we were expecting the company to revise its earnings a little more aggressively for the full fiscal year," said Trideep Bhattacharya, from UBS Securities.

'Milestone'

Forecasts for fourth-quarter sales, which Infosys expects to be about $1.07bn, were below expectations.

If confirmed, such a figure would represent a slowdown in annual growth to 31%.

Infosys said it had withstood the impact of the rising rupee, which recently climbed to a nine-year high against the US dollar.

Our unique business model combined with our value proposition continues to help our clients grow profitably S. Gopalakrishnan, Infosys chief executive

This penalises Infosys and other largest Indian outsourcing firms, known as the "Bangalore tigers", which generate much of their business from the US.

But recent business wins, including a contract to manage Dutch firm Philips' back-office finance and accounting functions, boosted the firm's fortunes.

In the past three months, Infosys has added 8,500 new employees to its payroll, equivalent to more than 10% of its entire workforce.

"We have achieved yet another milestone by crossing $1bn in revenues this quarter," said chief executive S. Gopalakrishnan.

"In an increasingly flat world, our unique business model combined with our value proposition continues to help our clients grow profitably."

Infosys and other outsourcing firms have been setting up "near shoring" offices in Eastern Europe and Latin America to be closer to their clients.

The firm recently opened a Mexican office to support its US business consultancy unit.

The firms are also setting up offshore development centres in China, whom they all fear will be their greatest competitive threat in the future.