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Infosys net up 24%, but revenue guidance proves a drag for scrip

Source : BUSINESS_STANDARD
Last Updated: Fri, Oct 12, 2012 19:01 hrs

Information Technology (IT) major Infosys on Friday announced that it had posted a net profit of Rs 2,369 crore in the quarter ended September 30 — a 24.3 per cent increase over that seen in the same quarter a year ago. However, it disappointed the market yet again — for the third quarter in a row — by maintaining its already conservative dollar-term revenue expectation at five per cent growth for 2012-13.

This proved to be a drag for the company’s stock, which slipped 5.4 per cent from its previous close to end Friday’s trade on the Bombay Stock Exchange at 2,395.7. Also, Infosys’ performance pulled the BSE IT index 152.09 points down.

The Bangalore-based company, which counts global corporations like Bank of America, BT Group and GlaxoSmithKline as clients, maintained its dollar-term revenue guidance of $7.3 billion for the full year, but it said it had not factored in the revenues it would earn from Swiss management consulting firm Lodestone, the acquisition of which is not over.
 

CONSISTENT SHOW
  Q2 FY13 Q2 FY12 % chg Q1 FY13 % chg
Revenue 9,858 8,099 21.7 9,616 2.5
Net profit 2,369 1,906 24.3 2,289 3.5
PBIT 3,303 2,668 23.8 3,169 4.2
Source: Company; PBIT is profit before interest and taxes

Infosys’ revenues rose 21.7 per cent to Rs 9,858 crore on a year-on-year basis. On a sequential basis (compared with the trailing quarter), its net profit went up 3.5 per cent and revenues 2.5 per cent.

CEO & MD S D Shibulal said: “The Q2 numbers are early indicators of the success of our strategy”, despite the challenging macroeconomic environment. “However, the economic environment outside continues to be challenging and we don’t see any reason to change the revenue guidance for the full year,” he added.

The company’s margins were under pressure due to higher outgo towards subcontractors’ cost and the selective promotions and salary hikes it had given. The operating margin came down by 170 basis points in the quarter to 26.3, one of the lowest in the recent quarters. For the full year, the company said, the operating margin would be impacted by 200 basis points because of the wage hike effected across the board from October 1.

On the operational front, Infosys enhanced its productivity by improving the utilisation rate, which went up to 69.6 per cent (including trainees) from 67.2 per cent in the previous quarter. The volume growth (billable man hour per quarter) of 3.8 per cent was an improvement from the previous quarter, when it had stood at 2.7 per cent.

Despite adding 39 clients in the quarter, the company witnessed sluggish growth in its top accounts. The company’s only client in the $300-million (per annum) revenue bracket ramped down to the $200-million bracket. However, the company adding six large accounts, with deal size of over $100 million each, besides signing eight transformational projects in the quarter, came across as bright points.

“Infosys continues its relatively weak trend and year-end outlook, with a view that the market continues to be weak. It will be interesting to see others’ results in the next few days, but it is likely the trend of performance gaps widening between various Indian service providers would continue for some quarters,” said Partha Iyengar, head of research, Gartner India.




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