Goldman Sachs: India IT: Infosys Technologies (INFY.BO/INFY, Neutral, Rs3,123.00)

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Infosys Technologies (INFY.BO/INFY, Neutral, Rs3,123.00)  
 Demand backdrop in 2011 is positive – Client interactions suggest budgets in 2011 to
be flat or modestly up (+2%-3% yoy). It does not expect budget flush at year end in
2010. Companies are looking to reduce costs on their core IT investments/systems, and
looking to increase spend on the peripheral.

 Growth expectations are broad-based; Europe continues to lag – Most of the
verticals are growing well with higher growth witnessed in retail. Retails spending
money on consumer connectivity, e-commerce projects, ERP connectivity. Recovery in
Europe is still lagging compared to the US. Uncertainties around country level still
remains and cross currency volatility is still high.
 Investments are more diversified – They are now proactively investing in Europe,
China, India, Japan, and Australia. It looks to diversify in strategic regions to increase
scale and some specific delivery capabilities. It is very keen to grow its presence in
China, especially, both in delivery capabilities and market presence.
 Vision 40/40/20 is organic and not time-bound – Infosys targets a revenue mix from
North America/Europe/Asia-Pac at 40%/40%/20%. It looks to achieve it through higher
growth from Europe and Asia-Pac. Inorganic growth could accelerate the strategy but
is not a part of the vision.
 Biggest challenges – managing growth and currency risks – Management
highlights managing growth as the biggest challenge in the long term to address client
demand as it does not enjoy the strategic partner position with the majority of clients.
Currency remains the largest risk in the near term.