Infosys Tech back to double-digit growth

Infosys Tech back to double-digit growth

Last Updated: Fri, Oct 15, 2010 20:01 hrs

Net profit increases 13 per cent, company revises guidance

Signalling the ‘turning point’ for India’s $60-billion export-driven information technology (IT) services industry, IT bellwether Infosys Technologies today posted double-digit growth, both in rupee and dollar terms, for the first time since 2008. This has also prompted the country’s second-largest IT service company to revise its expectation (guidance) upward for the third-quarter and the year ending March 2011.

The Bangalore-based company, which counts American Express, Bank of America and BP among its prized customers, logged a 13.2 per cent rise in its September quarter net profit at Rs 1,737 crore, compared to a year earlier. A strong recovery in demands, larger deals, and utilisation, which touched an all-time high of 81.2 per cent, were cited as main reasons.

Consolidated revenue grew 24.4 per cent to Rs 6,947 crore. On a quarter-on-quarter basis, net profit and revenue grew 16.7 per cent and 12.1 per cent, respectively.

Operating profit at Rs 2,098 crore bettered the same of the corresponding previous quarter by 23.9 per cent and the first quarter of this financial year by 19.5 per cent.

The company’s margins expanded by 1.9 per cent against last year, which got a benefit of 0.8 per cent due to currency and 1.1 per cent because of increase in pricing and utilisation.

"It’s certainly a turning point for ourselves as well as for the whole industry, since this is for the first time we are seeing a double-digit growth, both in our revenues and net profit, after a gap of almost three years. When the downturn happened, people said the days of double-digit growth were over. This proves how resilient is the IT services industry in India and it also gives a renewed confidence to all of us," said Kris Gopalakrishnan, CEO and MD of Infosys Technologies.

Earnings per share (EPS) was Rs 30.41, a rise of 13 per cent over the corresponding quarter last year.

In dollar terms, while net profit went up by 18 per cent to $374 million, revenues rose 29.60 per cent to $1,496 million on a year-on-year basis.

Infosys’ revenue growth beat even the most bullish estimates, including that of CLSA, which had forecast the revenue growth to be in the range of eight to 8.5 per cent in dollar terms.

"Infosys’ results for the second quarter of 2010-11 were above our estimates. The double-digit revenue growth was a positive surprise and so was the increase in revenue productivity. The increase in guidance in US dollar terms is encouraging. The results reflect the increased demand, which large Indian IT companies are experiencing," said Dipen Shah, senior VP - PCG Research, Kotak Securities.

The results, however, failed to impress the street, which was expecting Infosys to give a much strong guidance, shedding its ‘conservative outlook’. The company lost 3.39 per cent in a bearish market, which analysts see more as a correction than anything else.

"The market might be expecting something ‘unrealistic’ and thus, the stock movements are reflecting the corrections, which were bound to happen," said Sashi Bhusan, senior research analyst of Prabhudas Lilladher. "The dollar terms’ guidance given by the company looks good even though in the flip side, the company’s EPS guidance of Rs 115- Rs 117 looks slightly conservative, which might be largely due to currency appreciation."

In the just-ended quarter, Infosys had a volume growth of 7.2 per cent, though it was less than the 7.6 per cent reported in the previous quarter of 2010-11. This is for the fourth quarter in a row that Infosys has posted a volume growth of over five per cent. The company added 27 clients during the quarter. The company said nine of the new contracts signed during the period were above $100 million run rates (in a year), with two of these were more than $200 million.

Infosys also revised its revenue guidance for the full year, both in rupee and dollar terms. The company expects sales of Rs 26,951-27,165 crore, compared to its July forecast of Rs 26,441-Rs 26,885 crore, with a year-on-year growth of 18.5 to 19.4 per cent. In dollar terms, it revised its revenue guidance to $5.95-6 billion, compared to the previous outlook of $5.81 billion.

Infosys declared an interim dividend of Rs 10 per share and a special dividend of Rs 30 per share on entering into the 30th year of operation, which will cost the company Rs 1,800 crore.

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