The first official confirmation of the impact of global technology slowdown on the Indian information technology (IT) industry came Tuesday with Infosys technologies reporting reduced billing rates and sluggish recruitment in the quarter ended June.

Infosys, India's second largest software exporter, managed to beat market expectations in revenue terms and reported a 49.9 percent increase in net profit to Rs. 1.9 billion in the April to June period over the corresponding period previous year.

But, at the same time it has posted a 6 percent drop in offshore pricing rates, a considerable drop in recruitment, a "marginally" higher number of people on the bench and cancellation of new projects.

The candid admission by the country's "most admired company" in the first quarter of the "slowdown year" justifies its forecast of revenue growth rate of a meager 30 percent in the current fiscal, down from over 100 percent growth rate posted in previous years, say analysts.

"It is a sad tale for the rest of the industry if this is what has happened to one of the biggest of Indian IT companies," an analyst, who did not want to be named, told.

N.R. Narayana Murthy, chairman of Infosys, however, tried to put up a brave face by saying that the lower billing rates of the company was a result of the growing competition in the sector.

"We are not volunteering to accept price cuts. We want to protect margins. But, if a competitor is willing to take on major cuts, we have to be realistic," Narayana Murthy, told a conference call with analysts, organized by Goldman Sachs.

Infosys' income jumped 68.9 percent to Rs. 6.26 billion in the quarter ended June from Rs. 3.7 billion in the corresponding period previous year.

This included a volume growth of 10.9 percent and a blended price decline of 2.8 percent as compared to the first quarter of fiscal 2001. Earnings per share increased from Rs. 18.34 in quarter ended June 30, 2000 to Rs. 28.72 in the April-June quarter this year.

It added 26 new clients as against 34 in the first quarter of last fiscal and secured 95.2 percent of its business from old clients. The company added 116 employees to its staff strength of 9,831 as on March 31,2001.

But, on the other hand, it phased out the joining schedules of campus recruits to align them with business requirements.

One of the major reasons for the billing rates drop is said to be the changing nature of businesses in the IT sector. Corporates are moving more towards maintenance rather than new applications.

In terms of software development, with maintenance being an integral part of it, clients are getting "more and more cautious."

In the new applications segment, projects are getting deferred. The telecom research and development field has become "volatile" with telecom majors attempting to minimize costs. "There is a 6 percent drop in offshore rates," Narayana Murthy told the analysts.

Infosys' admission of offshore price cuts belies the expectation of the industry that the Indian IT sector would not be affected by the global technology meltdown as its software services sector is cost effective.

In Infosys's case, a narrow band separates onsite and offshore project work. The revenue split was 47.50 percent onsite and 52.50 percent offshore works. The effort would be now to increase the offshore by 2 percent.

"There is a lot of fuzziness in the market. Decision making cycle is increasing. We are fully geared to meet the challenge of the market with all the ingredients of infrastructure, human resources in place. The only limiting factor is the market," said the Infosys chief.

Shibu Lal, director of Infosys, said: "Some projects have been cancelled but the same customers have had other projects with us."

"In June, there were some heartening projects. But, we don't know if that is trend setting," said Phaneesh Murthy, another director, at the news conference.

The company's employee utilization rate has "improved" to reach 73.2 percent in the first quarter of current fiscal. Infosys is doing four times the training that it did in the past, re-skilling them, Lal said.

Infosys' e-business engagements contributed 23 percent of the total revenue as against 25.8 percent in the corresponding quarter last year.

On the outlook for the quarter ending September 30, the company expects a business between Rs.6.25 billion to Rs.6.40 billion.

"It has been a comfortable quarter, no retrenchments, we continue to hire sales staff, I think we are much better placed than anybody else to face the challenging business environment," said Nandan Nilekani, managing director of Infosys Technologies.