Will not outbid HCL Tech for Axon group.
Propped up by a falling rupee, India’s second-largest IT services provider Infosys Technologies managed to post a 30.2 per cent increase in its consolidated net profit (Indian GAAP figures) to touch Rs 1,432 crore for the second quarter of the current financial year over the corresponding period last financial year. Its revenues, too, were up 32 per cent year-on-year to touch Rs 5,418 crore.
The company also announced it will not increase its bid for UK-based Axon. Infosys had earlier offered 600 pence per share to acquire Axon Consulting, after which HCL Technologies had offered 650 pence per share for the same target.
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The stock markets, however, thumbed down the stock which closed lower 2.2 per cent on the Bombay Stock Exchange since the global slowdown and sub-prime fallout took their toll in dollar terms. Indian IT firms earn in dollars and spend in rupees. Infosys’ revenues grew only 5.3 per cent sequentially in dollar terms, while its net profit grew around 4 per cent (on International Financial Reporting Standards).
At a time when the market was looking at comfort from its dollar guidance, the company scaled it down by around 3 per cent. Saying “it is prudent to be cautious”, the management revised its full-year dollar guidance down to 13.1 to 15.2 per cent — perhaps its lowest revenue growth since inception — from 19-20 per cent.
“Based on our expectations, Infosys was able to just meet the lower end of Q2FY09 US dollar revenue guidance. The management was relying on the revival of IT spending in the second half (H2) of FY09 to meet its dollar revenue guidance. With worsening demand, the outlook for Q3 is negative to flat growth. We maintain our negative outlook on the sector and believe that uncertainties over H2FY09 and FY10 are far from over,” says Anurag Purohit, Research Analyst, Religare Securities.
The results were better than expected but the guidance was a bit disappointing, opined another analyst from a leading brokerage firm. “Besides the Q3FY09 revenue guidance at $1175-1220 million is a wide range in our view,” he added.
Meanwhile, the new client addition of 40 (49 in the last quarter) is at an all-time low for Infosys. But hiring numbers are still in place. During the second quarter, Infosys and its subsidiaries added 10,117 employees (gross). The net addition during the quarter was 5,927. The company is looking to add 4,500 employees in Q3.
It says its pricing has been stable. Onsite revenue productivity has gone up by 0.6 per cent and offshore has gone up by 0.1 per cent. Infosys does not see any major price renegotiation requests from its clients at this point in time.
The company, which had hedged around $932 million for the whole year, reported a mark-to-market (MTM) losses of $28 million (around Rs 135 crore). It now has hedged around $810 million.
The rupee depreciation, however, also had a positive impact of 2.5 per cent on the operating income. For the full year, the company is expecting operating margin of 31.4 per cent. The company has announced an interim dividend of Rs 10 per share or 200 per cent on par value of Rs 5 per share for the first half (April-September) of this fiscal.
Cognizant reaffirms Q3 guidance
Nasdaq-listed Cognizant Technology Solutions, an industry bellwether, reaffirmed its guidance, issued on July 31, 2008, of revenue of at least $723 million (around Rs 3,540 crore) for the third quarter and at least $2.81 billion (around Rs 13,000 crore), for the full year 2008. It will announce results for the third quarter ended September 30, 2008 on November 5.
