Tech bellweathers sustain performance

RESULTS REVIEW: January 2006

(Rs crore)

Q3FY06

Q2FY06

%change

Income from software services, products & BPO

2532.00

2294.00

10.40

Operating profit

861.00

734.00

17.30

OPM (%)

34.00

31.90

210 bps

Net Profit after tax before exceptional & minority

649.00

606.00

7.00

NPM (%)

25.63

26.40

-

EPS (Rs) Diluted, Par value Rs 5/each

23.03

21.63

-

12-m trailing PE @2975

35.17

- -  The operating margin expanded by 210 basis points though much of this was due to the depreciation of the rupee. The company incurred a forex loss and plans to hedge its forex earnings through options in the future.  

Revenues, when adjusted for the depreciation of the rupee against the dollar (3.5 per cent during the quarter), grew at just 6.9 per cent q-o-q. With the volume growth at just 6.70 per cent, Infosys has not been able to manage much of a price increase in the quarter, mainly because 93 per cent of the revenues are derived from existing clients. It is the new clients, who contributed the remaining seven per cent of revenues who are being billed at 3-4 per cent higher rates.

While EBITDA margins are higher by 210 basis points q-o-q at 34 per cent, around 140 points has been due to the depreciation of the rupee. The expenses on SG&A came off from 15.1 per cent of revenues in Q2FY06 to 13.6 per cent, thanks to a write-back of bad and doubtful debts, though the company has hired more people and spent more on training. The management has indicated that this ratio would settle at around 14 per cent in the future, with more people being hired.

Infosys plans to recruit 3500 people in Q4FY06, higher than the 3226 added in the December quarter.

During the quarter, revenues from Europe grew one per cent q-o-q, while the Australian operations broke even. Besides, Infosys bagged 36 new clients in the December quarter, taking the number of clients billing $one million to an impressive 206 clients, up from 191 in the previous quarter.

The consulting business which notched up revenues of $10 mn in the December quarter should grow 30 per cent in Q4FY06 and break even in the next couple of quarters. Progeon notched up revenues of $22.5 mn.

Infosys has guided an EPS of Rs 24.30 - Rs 24.70 and revenues of Rs 2590 -2599 crore for Q4FY06, taking the value of the rupee at Rs 44.50. For FY06, the company is targetting an EPS of Rs 89.90 - 90.30 and revenues of Rs 9487