Infosys Q1 net below forecast

US visa expenses, firm rupee eat into margins.

Impacted by a strengthening rupee against the euro and the pound, and rising US visa charges, Infosys Technologies reported a less-than-expected 37 per cent rise in net-profit for the quarter ended June 30, 2005, to Rs 532 crore.

While Infosys' performance was generally perceived as slightly below expectations, the information technology services firm continued to beat its own guidance, for the first quarter of this financial year as well.

Infosys reported revenues of Rs 2072 crore, close to a 37 per cent year-on-year growth. In April, the company had forecast a revenue growth of between 32 per cent and 33.2 per cent at between Rs 2,002 crore and Rs 2,020 crore.

The company also beat its own earnings per share forecast: ordinary activities for the June quarter were Rs 19.63 (basic), up 35 per cent. The forecast was Rs 19.30, up 32.7 per cent year-on-year.

But its net profit for the quarter decreased by 4.78 per cent compared with profits for the three months ending March 31, 2005. Mohan Das Pai, chief financial officer of the company, said, profits would show a 3.62 per cent sequential increase, excluding the Rs 45-crore sale of Infosys' minority stake in Yantra Corporation of the US.

A Rs 30.5-crore ($7 million) US visa expense and a Rs 14.9 crore net negative impact from currency fluctuations contributed to lower margins, Pai said.

Gross margins for the quarter were 46.7 per cent compared with 47.6 per cent for the last quarter of fiscal 2005, and net margins were 25.7 per cent for the quarter compared with 25.8 per cent excluding the exceptional item.

Over the next few quarters, India's second largest IT services exporter expects pricing to be stable, with between two and three per cent margin gains in new and re-negotiated contracts.

For the full year, ending March 2006, Infosys expects revenues to grow between 25.5 per cent and 27 per cent to between Rs 8,947 crore and Rs 9,051 crore, against an increase of between 24.7 per cent and 26.6 per cent it had forecast three months ago.

For the quarter ending September 30, Infosys expects revenues between Rs 2,202 crore and Rs 2,215 crore, growing between 25.9 per cent and 26.6 per cent year on year. Earnings per share from ordinary business would be between Rs 19.80 and Rs 20.30, growing between 18.5 per cent and 21.5 per cent, the company said.

Nandan M Nilekani, managing director of Infosys, said, "The focus now will be on developing competencies of our staff. We have a major plan afoot for the purpose and a sophisticated certification programme."

The company added 3,056 employees to its staff in the quarter, including 773 in Progeon, the business process outsourcing subsidiary. Infosys and subsidiaries added 36 new clients, taking the total to 443.