India’s second-largest software services company is eyeing firms that operate in the healthcare and pharmaceuticals sectors.
Infosys Technologies expects to find acquisition opportunities in bargain basement America as it seeks to reaccelerate growth in the midst of an ongoing economic slump, co-chairman Nandan Nilekani said on Thursday.
“Acquisitions will definitely be very accessible in this market from a price point of view,” Nilekani told the Wall Street Journal. “If it makes sense, we’ll do it,” he said, adding that Infosys has $2 billion in cash and no debt.
India’s second-largest software services company is eyeing firms that operate in the healthcare and pharmaceuticals sectors. V Balakrishnan, chief financial officer of Infosys, told DNA earlier this month that the company was looking at firms in the $100 to $200 million price range as targets.
Nilekani, who is in New York promoting his new book ‘Imagining India’, said he hopes to better diversify the geographic mix of Infosys's revenue and reduce its dependence on the US. America now accounts for 63% of revenue and Nilekani said he would ideally like that to be about half.
Infosys like other Indian outsourcers is nervous about the slowing economy, rising US protectionism and its fallout. Of the economic crisis, Nilekani said, “I’ve never seen this level of lack of clarity.”
He said executives are “more focused on short-term tactical issues” than making bigger decisions about outsourcing. He told the Journal that “rising protectionist sentiment” in the US is also affecting customers' decision-making about outsourcing.
The recession has thrown offshore outsourcing into convulsions.
Over the past weeks, a mixed picture has emerged. International Business Machines (IBM) is in the process of sacking 5,000 US engineers and shipping the work out to India. Similarly, JP Morgan Chase is planning to outsource work estimated at $400 million to India.
However, a survey by BDO Seidman, the seventh-largest US accounting and consulting firm, forecast a decline in international outsourcing this year with 22% of technology firms leaning towards the US in 2009, compared to 16% supporting outsourcing to China and just 13% to India.
The unpredictability of the US market is nudging Infosys to step up sales to new customers in Europe which accounts for about 30% of its revenues.
Infosys targets four big US industry sectors: finance, high-tech, manufacturing and retail. Sources told DNA Money the firm was now wooing US customers in the more recession-resilient pharmaceuticals and healthcare sectors.
Nilekani said Infosys was working with customers on “alternative payment arrangements” including some that would link fees to business results. Other customers are asking to pay on a per-transaction basis, rather than a lump sum for a system.
He reiterated Infosys’s earlier guidance of about 12% revenue growth for the fiscal year ending March 31. That would be a sharp deceleration from growth of 35%, as measured by US accounting rules, in the year ended March 31, 2008.
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