UPDATE 4-Currency risk clouds Infosys outlook; shares fall 3 pct

* Ups full-yr dlr growth f’cast to 24-25% vs 21-24% mkt view

* Q2 profit 17.37 bln rupees vs 17.17 bln rupees consensus

* Extreme currency volatility a concern – Infosys CFO

* Q2 staff addition highest in about three years

* Shares end 3.4 pct weaker after touching record high
(Adds more analyst, management comments)

By Bharghavi Nagaraju

BANGALORE, Oct 15 (BestGrowthStock) – Infosys Technologies
(INFY.BO: ) warned currency volatility could crimp growth for
India’s outsourcing sector, sending its shares down, despite
beating quarterly estimates and raising its annual sales
forecast.

India’s No. 2 software services exporter, which joined
Intel Corp (INTC.O: ) in signaling strong technology spending by
global firms, highlighted “extreme” currency volatility as a
concern for the industry that earns more than half its sales
from the United States.

“Rupee will play a spoilsport going forward. We don’t
expect a major bump up in the stock price,” said Ambareesh
Baliga, vice president at Karvy Stock Broking. “Also, there’s
pressure from overhead expenses.”

An appreciating rupee could also squeeze margins for larger
rival Tata Consultancy Services (TCS.BO: ) and No. 3 Wipro
(WIPR.BO: ), which report results next week.

The top three software firms have raised salaries and are
hiring more staff as they compete for talent and orders from
the likes of IBM (IBM.N: ) and Accenture (ACN.N: ).
<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^

StarMine comparative data: http://link.reuters.com/ruk68p

Intel results: [ID:nN11136922]

Graphics on Infosys earnings:
http://link.reuters.com/deq48p

Highlights of Infosys managements comments: [ID:nSGE69E0A2]

INSTANT VIEW on Infosys results: [ID:nSGE69E03O]
^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>

Shares in Infosys, valued at $41 billion, fell as much as
3.7 percent, after initially hitting a record high in a weak
Mumbai market (.BSESN: ). More than 530,000 shares were traded on
the Bombay Stock Exchange, nearly four times the 30-day average
volume. The shares ended 3.4 percent lower.

Infosys, which kicked off results for India’s $60 billion
showpiece outsourcing industry, powered by a low-cost young
workforce, added 7,646 employees in July-September — its
strongest pace of hiring since October-December in 2007.

“There is some stress on rupee. But, it is likely the RBI
may step in and intervene to curb a steep appreciation in
rupee,” said Shishir Bajpai, senior vice-president of IIFL
Private Wealth, referring to the Reserve Bank of India.

“Expectations of topline and bottomline growth still
remain. Other things are in place. We continue to hold the
stock for our clients,” he said of Infosys shares.

Analysts are unlikely to upgrade their earnings estimates
for the company, known for its conservative guidance. Infosys
expects dollar revenue to rise 24 to 25 percent in its fiscal
year ending in March 2011 versus market forecasts of 21 to 24
percent.

Infosys has raised guidance for the fourth consecutive
quarter. In July, it forecast growth of 19 to 21 percent.

“But from an economic environment, from a currency
environment, the environment is challenging. And for our
business, there is a third (challenge), which is the
regulatory environment,” said Infosys Chief Executive S.
Gopalakrishnan.

For the year to date, the rupee has gained 5.6 percent on
record $22.5 billion foreign fund inflows into shares, making
the currency one of the best performers in Asia.
Infosys said net profit for its second quarter ended Sept. 30
rose 13.2 percent to 17.37 billion rupees ($395 million). This
compares with a Reuters poll of 17.17 billion rupees.

“I think, it does show that IT spending cycle is stronger
than some believed. For the larger companies, given Infosys
results, we may see similarly good results,” said Vikas
Pershad, Chief Executive of Veda Investments in Chicago.

“All this said, we need to pay attention to the rupee
appreciation.”

Based on Thomson Reuters’ StarMine Analysts Revision Model,
a measure of change in analyst sentiment, Infosys ranks below
rivals Wipro, Tata Consultancy, Cognizant Technologies (CTSH.O: )
and Accenture.

The model measures analysts’ revision of key indicators
such as earnings and revenue estimates and changes to their
ratings.

Indian software companies hedge some of their currency
exposures but a chunk of their costs are in rupees, and
therefore currency appreciation tends to squeeze margins.

Bangalore-based Infosys, which counts BT Group (BT.L: ) and
BP (BP.L: ) among its main clients, was set up by seven engineers
in 1981 with an initial investment of $250.

Indian software firms are also concerned about what they
fear are “protectionist measures” by the United States, which
include a new immigration bill that would raise the cost of
U.S. work visas and a state ban by Ohio on offshoring
government work.
($1 = 44.1 rupees)
(Additional reporting by Ami Shah in MUMBAI; Writing by Sumeet
Chatterjee; Editing by Anshuman Daga)

UPDATE 4-Currency risk clouds Infosys outlook; shares fall 3 pct