The market is becoming more competitive. We believe that most of our growth in the next 12 months will be volume driven

S.D. Shibulal Infosys

"Last year was difficult for both Infosys and the Indian software industry," said chief executive Nandan Nilekani.

"We believe that the outlook for the next 12 months will continue to be challenging," he said.

Net profit rose to 8.1bn rupees (�120m) and revenue was up 37% at 26bn rupees, the company said in a statement.

While the results were better than analysts expected, it was nowhere near the 114% profit growth recorded in 2000/2001.

Healthy finances

Chief financial officer Mohandas Pai said cash reserves of over 10bn rupees would allow the company to continue to develop and see it through the current economic downturn.

The board also recommended shareholders approve raising the limit on foreign institutional investment in the company from 49% to 100%.

Infosys, with a workforce of over 10,000, provides software support and services to about 300 clients in India and abroad.

Outlook 'heartening'

Shares in the Nasdaq-listed company rose 3.4% to 3,726.15 rupees after it set a revenue growth target of 17-20% for the year to March 2003.

"The guidance is at the higher end of market expectations and very heartening," said Jayesh Shroff at BOB Asset Management.

The forecast growth is just over half the 31.7% rate achieved in the past year, and way down from the previous five years when sales nearly doubled every year.

The slowdown reflects weaker demand and cut-rate pricing pressure in the US market, which accounted for 70% of company revenue last quarter.

"The market is becoming more competitive. We believe that most of our growth in the next 12 months will be volume driven," said Infosys director S.D. Shibulal.