INFOSYS PLANS TO RAISE THE STAFF PAY

 Infosys Technologies Ltd., India's second-largest software exporter by sales, is considering raising salaries of all its staff in April, its second such hike since October, as it expects the recovery in demand for technology outsourcing to get stronger as the year progresses.


The planned pay hike comes at a time when the Indian information technology sector is emerging strongly from the impact of the global slowdown. Software exporters are now getting more contracts than a year ago as customers in the U.S. and Europe are reviving shelved projects and allocating more funds for technology services.
"In a normal year, we have given wage hikes in April, so this year also we are looking at raising wages in April," Chief Financial Officer V. Balakrishnan told Dow Jones Newswires Thursday. "We will decide the quantum later, it is too early."

Bangalore-based Infosys, which is listed on the Nasdaq and the Bombay and National stock exchanges in India, had in April 2009 put a freeze on wage hikes and promotions. However, in October, it gave promotions and increased salaries by an average 8% in India and 2% outside the country, as it saw signs of an impending recovery.

"We believe the environment has stabilized, but clients are still very cautious," Mr. Balakrishnan said.

The IT sector was among the most-severely hurt in India from the global slowdown as clients cut projects and demanded cheaper rates for products and services. However, the mood has now turned upbeat.
Top IT companies such as Infosys, Tata Consultancy Services Ltd. and Wipro Ltd. have posted strong numbers for the October-December quarter, indicating the reviving fortunes of a sector that is exposed more to the economic developments overseas than at home.

Infosys has raised its outlook for the fiscal year ending March 31 while TCS has also said it will consider raising salaries in the next fiscal year.

In a recent report, ratings agency Fitch projected a "gradually improving quarterly revenue growth through 2010 for large players like TCS, Infosys and Wipro as an improving global economy leads to a gradual recovery in client demand for discretionary expenditure."
Sandeep Muthangi, a technology analyst at brokerage IIFL Capital, said he expects that the salary hike at Infosys may be on similar lines to October.
The proposed pay increase indicates that "they (Infosys) are looking at very strong revenue growth next fiscal year...they must be seeing very good demand drivers," Mr. Muthangi said.

Mr. Balakrishnan, however, expects the proposed wage hike to hurt Infosys's operating margin in the April-June quarter. "But if growth comes, it can offset some of the impact," he added.
For the quarter ended Dec. 30, Infosys's operating margin expanded to 35.1% from 34.6% in the previous three-month period.