Weaker rupee causes Infosys losses worth Rs.800 mn

July 11th, 2008 - 7:29 pm ICT by IANS  

Bangalore, July 11 (IANS) Infosys Technologies Ltd incurred a loss of Rs.800 million in the volatile forex market due to 5.6 percent depreciation of the rupee during the first quarter this fiscal, a top company official admitted here Friday. “We had a non-operating loss of Rs.800 million due to the rupee depreciating 5.6 percent to Rs.43.04 during the last two months from Rs.40.02 in April,” Infosys chief financial officer V. Balakrishnan told IANS.

This was after the company had hedged $760 million at Rs.40.6 as forward cover in a volatile forex market, he said.

A weak rupee, however, offset the negative impact of increases in salary (2.2 percent), visa costs (0.7 percent) and lower utilisation (1.5 percent) on the operating margin by two percent.

“Operationally, a depreciating rupee benefited us by Rs 1.11 billion,” he noted.

Sequentially, operating margin declined by 2.1 percent to 30.4 percent for the quarter under review from 32.5 percent in the previous quarter (January-March) of the last fiscal.

Operating profit grew 36.4 percent to Rs.14.8 billion from Rs.10.8 billion in the same period a year ago, but declined marginally from the previous quarter.

“Margins for the quarter were impacted due to increases in salary and visa costs, which to some extent were offset by rupee depreciation. We believe that the currency market will remain volatile in the short term,” Balakrishnan said in a statement earlier.

Due to widening trade deficit, higher inflation, soaring crude oil prices and decline in capital inflows, the rupee is expected to be under pressure like any other currency.

“We are closely watching the movement in the forex market. In the short-term, we see the volatility continuing. We have hedged $811 million at Rs.43.04 for two quarters,” Balakrishnan pointed out.

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