Infy net surges 9.8%, cautious on guidance

Company says may face headwinds in second half, stock dips 5%

Infosys, India’s second largest information technology services company, indicated weakness in the second half of the financial year, as it held on to its constant currency guidance.

The Bengaluru-based company said revenue growth for 2015-16 in dollar terms was expected to be 6.4-8.4 per cent, against the earlier projection of 7.2-9.2 per cent.

At the end of the day’s trading on the BSE on Monday, Infosys lost 3.9 per cent of its share value.

In the quarter ended September, Infosys’s financial performance was a continuation of the impressive showing of the previous quarter. The company reported 9.8 per cent growth, year-on-year, in its net profit at Rs 3,398 crore and revenue grew 17.2 per cent to Rs 15,635 crore.

Sequentially, net profit grew 12.1 per cent while revenue grew 8.9 per cent, ahead of the consensus analysts’ estimates compiled by Bloomberg that pegged revenue and net profit at Rs 15,224 crore and Rs 3,282 crore, respectively.

 

 

Sequential revenue growth of six per cent in dollar terms during the quarter was the highest in the past 16 months, the company said.

Growth during the quarter was supported by a 3.7 per cent increase in man-hours billed. The company also expanded its operating margins by 153 per cent over the previous quarter to 25.53 per cent, backed by a 2.6 per cent improvement in pricing over the previous quarter.

“Growth during the quarter is a reflection of the execution of our strategy. On the whole, it was a very good quarter and good validation of our works,” said Vishal Sikka, chief executive officer and managing director of Infosys.

 

“We had strong all-round growth during the quarter driven by recent initiatives around service differentiation, improvement in client mining and higher focus on winning large deals,” said U B Pravin Rao, Infosys’ chief operating officer.

“The increase in revenue productivity was significant, volume growth was robust, client metrics and utilisation improved while attrition remained stable,” he added.

However, the company indicated it expected headwinds in the December quarter, which has fewer working days and client furloughs before the start of the next year’s budgeting cycle. Infosys stuck to its constant currency revenue guidance of 10-12 per cent for 2015-16, implying a revenue drop of two per cent to flat growth in the next two quarters.

“We are maintaining the guidance, but we will work very hard to make sure that we buck the trend,” said Sikka.Infosys continued with its aggressive client hunting strategy, adding 82 customers in July-September. The company said it had signed large deals with a total contract value of $983 million during the quarter.

“Infosys has made significant progress on new initiatives like design thinking, automation and artificial intelligence and these will shore up growth rates and sustain margins over the long term,” said Dipen Shah, head of private client group research, Kotak Securities.

Infosys’ quarterly performance was supported by 5.2 per cent sequential growth in the financial services segment, which accounts for close to a third of its overall revenue. Similarly, manufacturing and retail and life science grew 5.5 per cent and 7.9 per cent, respectively, quarter on quarter. North America, the largest market for the company, reported 6.1 per cent growth while Europe grew 8.3 per cent. Attrition during the quarter went up marginally with 9,142 people leaving the company against 8,553 in the previous quarter. The company said it was planning to hire 20,000 people in the ongoing campus recruitment season this year.