Expect Infy to raise guidance slightly: Moshe Katri

Infosys will kick off earning on Friday and even with a market which is as strong as this today, IT is lagging, Satyam is not doing well, neither is Infosys. So does the market have a sense that this time perhaps because of forex losses, the numbers may not look too strong?

He expects Infosys to raise guidance slightly higher. Project delays in case of certain investment bank clients will remain till the March quarter, he said. Volume growth slowdown has already been priced into the guidance, he added.

Excerpts from CNBC-TV18's exclusive interview with Moshe Katri:

Q: What is your sense of what kind of numbers and guidance Infosys might unveil this time around?

A: We just released our quarterly spending survey. The survey showed sequential improvement in some of the important demand matrix that we track and that includes funding for new projects. Project ramp for offshore base engagements and the outlook for offshore penetration rates, basically these results were applicable for the entire survey respondents and that includes respondents operating in the financial services space, which is obviously the space everybody has been focusing on.

The other important thing is that the outlook for 2008 spending budgets remain consistent and constant and pricing, which overall seems to be holding remarkably well considering the economic uncertainties. It's not only interest rates and in other terms your guests have been focusing on specifically on currency, everybody is focusing on that, but for your typical tech portfolio manager (PM) that is looking for defensive names in tech, it seems that while we are clearly not operating in businesses in usual environment, it is probably one of the few defensive areas that we see comfortable with demand and we are talking about visibility that has improved since the March quarter. 

So if you are looking at mission critical IT engagements that cannot be turned off, the choice will be to get these delivered offshore versus onsite and when we are looking at the labour arbitrage, we still see a pretty big opportunity for the offshore companies. So this is a long answer for a very short question on Infosys, but we expect them to probably come out with better than expected results.

We track these companies based on US dollars and not in rupees and we are looking at Infosys to raise guidance slightly higher as well. It is interesting because a lot these names indicated today that they are not doing well, but during the past two to three weeks, they have done about 15-20% and so specifically the ADRs and sentiment has turned sour again.

We are pretty much hearing the same concerns we heard nine months ago. The impact of a stagnant economy, the impact of rising oil prices on tech spending, it almost feels as if we are going through struggle between fundamentals, which on a relative basis looked okay.

One bellwether company report last week in our universe is Accenture, and it's had and exceptional quarter, no one really cared. Hopefully, we will get another decent quarter from Infosys.

So on the US side of the business, it is not predominantly currency because again the topline is going to be reported in dollars and there won’t be a big impact, but on the bottomline, there are other things in the making and a lot depends on which company has big hedging exposure and which doesn’t.

In our view, Infosys probably has one of the least exposures in terms of hedging and the other company we track is Cognizant, and they don’t hedge too.

Q: We spoke to someone form the industry yesterday and he made the point that volumes will see fallout and they are already seeing projects either being cancelled or delayed; do you think that might be worry for some of these tech companies?

A: The project delays that we have been talking about, based on what we have seen and what the survey is actually telling us, has been pretty much confined to certain clients in the investment banking space. This is news that the March quarter, we haven’t heard of anything significant in terms of cancellations since the end of the March quarter.