S&P revises Infosys outlook to ‘positive’ from ‘stable’

S&P also affirmed its ‘BBB’ rating on Infosys due to a good operating performance despite the global slowdown

Credit ratings agency Standard & Poor's (S&P), has said that it affirmed Infosys Technologies Ltd’s long-term corporate credit rating to ‘BBB’ and revised the company’s outlook to ‘positive’ from ‘stable’.

S&P said that it expects the company's revenue, which was steady during the downturn, to register moderate growth going forward. "Growth will be fuelled by the global economic revival and our expectation that India-based IT service providers will continue to benefit from higher outsourcing," said Suzanne Smith, S&P's credit analyst and managing director, corporate and government ratings, for South and Southeast Asia.

The ratings agency said that Infosys will benefit from its cost-competitiveness and strong management, as companies globally focus on improving cost efficiency. In addition, the company has been able to increase its earnings before interest, taxes, depreciation, and amortisation (EBITDA) margins to about 35%—the highest in the industry—through various strategic and operational measures. The operating performance of Infosys was sustained by effective management of employee costs, increase in fixed-cost contracts and offshoring, and other cost-cutting measures, with some support from a weak Indian rupee, S&P added.

"The improvement in operating performance is in spite of the company generating almost 90% of its revenue from developed countries in North America and Europe that have been the most affected by the slowdown," said Ms Smith.

S&P said that the positive outlook reflects its expectation that Infosys' operating performance would improve with a revival in the global economy. It also reflects its view of the resilience and flexibility of the company's operating performance during the economic crisis.
 

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