UPDATE 1-India's Infosys to freeze new hiring as growth slows

December 04, 2008

By Rajesh Kumar Singh

NEW DELHI, Dec 4 (Reuters) - Infosys Technologies Ltd (INFY.BO: Quote, Profile, Research, Stock Buzz) will freeze recruitment after meeting this fiscal year's target of hiring 25,000 staff, a telling sign the global downturn is hitting India's $52 billion outsourcing sector.

India's second largest software services firm however has no plans to cut jobs and is sticking with its third quarter outlook, CEO Kris Gopalakrishnan told reporters.

He said the outsourcing sector's growth rate would halve next year as some customers delay orders.

"Last year the IT industry grew more than 30 percent, this year it is looking at somewhere in the region of 15 percent," Gopalakrishnan said.

India's export-driven IT sector, used to a scorching pace of growth, has been hit by the financial crisis and recession in the United States, which contributes more than half their revenue.

In the last few years, the outsourcing industry has created tens of thousands of jobs, mainly attracting young workers, as global companies look to trim labour costs.

Infosys hired 16,000-17,000 employees in the first half of the fiscal year that began in April and would honour commitments to 6,000 under training, Gopalakrishnan said.

Infosys, which counts Goldman Sachs (GS.N: Quote, Profile, Research, Stock Buzz) and Philips Electronics (PHG.AS: Quote, Profile, Research, Stock Buzz) among its clients, cut its full-year dollar revenue outlook in October due to the worsening global downturn. [ID:nBOM352371]

Gopalakrishnan said on Thursday the company would freeze fresh recruitment, apart from meeting specific skill needs.

"We will have to look at controlling our cost, controlling our expenses making sure that we run an optimised business. We will have to look at what are things we need to do in order to prepare ourselves for the recovery." ( You could always outsource to China, or the Philippines).

"Growth is coming more and more from emerging markets so these are the things we need to prepare ourselves. We should not lose momentum in this slowdown," he said.

But Infosys still expects its strong client base and a weakening rupee to help it meet a forecast for December quarter earnings of $0.57 a share. The Indian rupee has fallen nearly six percent so far this quarter against the dollar.

"Infosys is seeing further degradation of the demand environment, with headwinds from leadership changes at customers, a shrinking large deal pipeline .... Pricing pressure has emerged," CLSA Asia-Pacific said in a report this week.

By 0845 GMT, Infosys shares were up 2 percent in a Mumbai market .BSESN, but outperforming a 4 percent gain in the broader Mumbai market .BSESN. Infosys shares have fallen 33 percent so far this year. (Writing by Narayanan Somasundaram; Editing by John Mair and Anshuman Daga)