Infosys takes in subsidiary losses

Infosys Technologies has maintained a high operating profit of 28.6 per cent despite absorbing losses made by some of its subsidiaries. While the company made a net profit of Rs 447.37 crore during the quarter, on a standalone basis, this stood at Rs 454.8 crore.

During the first quarter, the company's operating profits stood at about 28.8 per cent, indicating a flat growth in its operating profit for the second quarter. However, the company managed to maintain its operating profit despite witnessing a high level of net employee addition.

"Infosys added 5,010 employees in the second quarter and we have managed to absorb the cost of new hires," T V Mohandas Pai, chief financial officer, Infosys Technologies said. Average income of company employees increased by 1.7 per cent in the second quarter.

Progeon made a profit of Rs 5.22 crore and so did Infosys' Australian subsidiary which clocked Rs 3.66 crore. However, the consulting division and the China centre made a loss of Rs 13.86 crore and Rs 2.50 crore, respectively, during the second quarter ended 30 September 2004. These amount to a net loss of Rs 7.48 crore among Infosys' subsidiaries in the second quarter.

While overall volumes grew by 12.60 per cent, offshore volume growing more rapidly at 15.30 per cent.

The company has invested $ 7.5 million from its total commitment of $ 32 million, in the half year-ended September 30. Since it plans to invest about $12.5 million in the third quarter, the company's revenue guidance for this quarter will witness a one per cent impact.

"The difference in incremental increase in investment between second and the third quarter is about $ 5 million. This will reflect on our balance sheet to the extent of one per cent to the bottomline," Pai added.

There is likely to be a three per cent impact on the topline of Infosys Technologies sequentially between the second and the third quarter because of fewer working days in the third quarter compared to the second quarter, Mohandas Pai said.

Replying to a query on whether the company could switch to a policy that would give a clear outlook for the entire year instead of revising it every quarter, Pai said that this would not be possible as Infosys takes a quarterly approach to gauging its performance.

"As part of our philosophy on guidance, we believe that we should have the best visibility among other stake holders and we should be able to share this with them. We ensure that we give a credible guidance. We have a planning model which looks at revenues based upon book business and the anticipated business in the entire year. This is updated every quarter. So, we have a four quarter rolling plan for our guidance," Pai explained.