Infosys posted better-than-expected financials on Wednesday, reinstating the faith of investors in India’s $76-billion information technology (IT) industry that is primarily dependent on global outsourcing spends.
Aided by a depreciating rupee and all-round performance by key verticals and markets, including the US, India’s second-largest IT services company posted a 9.7 per cent rise in second-quarter net profit at Rs 1,906 crore.
The city-based company, which counts Goldman Sachs, BT and BP among its major clients, recorded revenues of Rs 8,099 crore, an increase of 16.6 per cent from the year-ago period, driven by strong client additions and volume growth of 4.5 per cent. Infosys added 45 new clients during the quarter ended September, compared to an addition of 26 clients in the previous quarter and 27 in the year-ago period.
On a sequential basis, net profit went up by seven per cent, while revenues were up by 8.2 per cent.
The strong numbers of the company, considered a bellwether for the sector, pulled up the technology stocks by 5.2 per cent. Infosys shares closed 6.83 per cent higher at Rs 2,680.50 on the Bombay Stock Exchange, after rising to a month high of Rs 2,690.
“We have demonstrated an all-round growth in the second quarter, despite the macroeconomic uncertainties which should be a cause of concern for the IT industry. With the realignment now over and Infosys 3.0 fully in place, we are poised to build long-term partnership with our clients and help them drive their business objectives,” said S D Shibulal, chief executive officer and managing director of Infosys.
The company lowered its revenue outlook in dollar terms for the financial year by about a percentage point to 17.1-19.1 per cent, from 18-20 per cent projected earlier. Its management emphasised this had been done due to unfavourable currency movements, even though there were no material pricing or volume changes.
However, Infosys raised its revenue guidance in rupee terms to Rs 33,501-Rs 34,088 crore, from an earlier forecast of Rs 31,777-Rs 32,311 crore.
“Infosys reported results which were in line with our expectations. The volume growth of 4.5 per cent was similar to what we had assumed. The increase in the rupee guidance for 2011-12 is largely driven by currency,” said Dipen Shah, head - fundamental research, Kotak Securities, in a statement. The volume growth guidance had been maintained against the backdrop of a challenging macro scene, he added.
The company, which was under the increased scrutiny of analysts in the wake of its eroding operating margin in the recent past, improved its margins by 209 basis points to 28.2 per cent, compared to the previous quarter.
The key attraction of Infosys’ financials was that its growth was primarily driven by geographies and verticals which have been growth drivers in the past.
For example, the company witnessed robust growth in the North America, which accounted 65.3 per cent of its revenues in the quarter under review. US revenues grew 6.3 per cent quarter-on-quarter, contrary to 0.6 per cent growth in Europe, reeling under the sovereign debt crisis.
Infosys improved its employee utilisation (including trainees) by 60 basis points to 70.2 per cent and reiterated its plans to hire 45,000 people, a mix of freshers and laterals (people with experience), during the year. During July-September, Infosys added 15,352 people (net addition of 8,262), which took its headcount to 141,822.
During the quarter, the company improved its cash (cash and cash equivalents) position to Rs 18,601 crore, from Rs 17,388 crore on September 30, 2010. Shibulal said the company was talking to many perspective acquisition targets in areas like life sciences, public services, both in product and platform spaces. “There is nothing to report now which is materially definite,” he added.
