Infosys Q2 profit up 49% on outsourcing

IT bigwig delivers on and gives positive guidance one more time.

Infosys Technologies registered a 48.64 per cent increase in net profit to touch Rs 447.37 crore for the quarter ended September 30, compared with the corresponding quarter last year.

During the same period, the software major's revenue touched Rs 1,749.33 crore, representing an increase of 51.88 per cent.

The company has decided to pay an interim dividend of Rs 5 per share, which means 100 per cent on an equity share of par value of Rs 5 each, against Rs 3.63 (adjusted for the 3:1 bonus issue of shares distributed on July 6) in the corresponding quarter last year.

Quarter on quarter, the company's revenue and net profit increased nearly 15 per cent each. Having surpassed its guidance for the July-September quarter, the company has revised its revenue outlook for 2004-05 at between Rs 7,132 crore and Rs 7,160 crore, representing growth of 47-48 per cent.

The company has given a revenue guidance of Rs 1,869-1,882 crore, representing growth of 49-50 per cent, for the third quarter. In the first six months of the financial year, Infosys registered a jump of 45.4 per cent and 44.1 per cent in topline and net profit, respectively, compared with the corresponding period last year.

While the earning per share (EPS) for the quarter saw a 47.10 per cent increase at Rs 16.71, the EPS outlook for the year was expected to be Rs 67, a rise of 43 per cent.

According to Nandan M Nilekani, president, CEO and managing director, Infosys Technologies: "Offshoring has become a mega trend as more customers are leveraging their partnership with Infosys to increase global competitiveness. Our approach is to marry differentiation with scalability, which is the key to higher client value."

The total volume growth during the quarter was 12.6 per cent, with offshore volume growing faster at 15.3 per cent. The onsite revenue fell from 51.9 per cent in the first quarter to 49.8 per cent in the second quarter.

Infosys achieved the surge in profits despite a net addition of 5,010 employees during the second quarter. Of this, 4,546 were in Infosys, while Progeon added 420 people.

On the one hand, the company hired aggressively, while on the other, it managed its expenses effectively and ensured that its bottomline was not affected.

The company has a strength of around 32,949 and plans to add another 4,000-4,500 people over the next two quarters.

"Pricing has been stable. Our expense management model has demonstrated flexibility in absorbing the cost of recruiting 5,010 employees, while maintaining margins. We have spent Rs 176.06 crore on capital expenditure during the quarter, and we have about 3.5 million sq ft of infrastructure under construction," TV Mohandas Pai, chief financial officer, Infosys Technologies, said.

Cash and cash equivalents, including investments in mutual funds, also increased by Rs 350.05 crore during the quarter to touch Rs 2,502.07 crore. This is despite the capital expenditure made by the company during the second quarter.

While the company is constantly fine-tuning its pricing contracts with existing clients, the pricing strategy for new clients is finding a "4-5 per cent up-take" when compared with its existing clients.