Infosys beats expectations; ups forecast on weaker rupee

BANGALORE - India’s second largest IT bellwether Infosys Technologies Tuesday posted a net profit of Rs.16.41 billion (approx $335.5 million/Rs.1,641 crore) for the third quarter of this fiscal (2008-09), registering 33 percent year-on-year (YoY) growth and 14.6 percent sequentially as per the Indian accounting system.

Under the international financial reporting standards (IFRS), the net income for the October-December quarter under review (Q3) is $330 million as against $310 million in the same period a year ago, a modest growth of 6.5 percent YoY.

Beating its forecast and investor expectations in times of global meltdown, the company’s consolidated income from software services, products and business process management grew by 36 percent YoY to Rs.57.86 billion from the projected Rs.55 billion at the beginning of the quarter under the Indian accounting system.

Sequentially, the growth was 6.8 percent from Rs.54.18 billion in the second quarter (July-September) of FY 2009.

Under the international financial reporting standards (IFRS), appreciation of the US dollar by Rs.1.74 to Rs.48.71 during the quarter from its conversion rate of Rs.46.97 has slightly dipped the consolidated revenue to $1.17 billion from a guidance of $1.2 billion, posting a modest eight percent YoY growth.

Sequentially too, the net income and consolidated revenue have declined by 2.5 percent and 3-7 percent respectively from the previous/second quarter of this fiscal (July-Sept) due to dollar appreciation.

The consistent record growth in topline and bottomline made the stock of the blue chip gain around five percent on the bourses in the first hour trading, resulting the share price touching a high of Rs.1,228 from an opening price of Rs.1,144.50.

‘In a challenging environment, our focus is on creating value for clients, running an optimised business model that will allow us to emerge stronger when the global economy starts recovering,’ Infosys Chief Executive and Managing Director S. Gopalakrishnan said in a statement.

Undaunted by the tough times, the company has revised its revenue forecast for the entire fiscal (2008-09) upwards marginally under the Indian accounting system and downwards under the new IFRS.

Keeping in view the currency volatility, the consolidated income for the entire fiscal (FY 2009) under the Indian accounting system would be in the range of Rs.215-218 billion, projecting 29-30 percent YoY growth as against Rs.213-217 billion (29 percent YoY) estimated in the previous quarter when the US dollar at Rs 46.97.

Under the IFRS, guidance for consolidated income has been lowered to $4.67-4.71 billion for FY 2009, with the US dollar at Rs. 48.71 from $4.72-4.81 billion, as estimated at the beginning of the third quarter (Oct-Dec).

The projected YoY growth is 11.8-12.8 percent under the revised guidance as against 13-15 percent estimated previously.

Similarly, for the third quarter (October-December) of FY 2009, consolidated income is expected to be Rs.55-57 billion, projecting 21-26 percent YoY growth under the Indian accounting system and $1.13 billion under IFRS, a decline of 1.2 percent to a growth of 2.5 percent YoY.

‘On a constant currency basis, pricing declined by 1.8 percent during the quarter. We are comfortable with the current pricing environment and believe that the pricing could get impacted if the situation worsens further,’ Chief Operating Officer (COO) S.D. Shibulal admitted in the statement.

According to the company’s financial statement for Q3, the net profit includes a net tax reversal of Rs.620 million as against Rs.500 million in the same quarter of the previous fiscal.

As a result, the company’s earnings per share (EPS) increased to Rs.28.66, a YoY growth of 33 percent. Excluding the reversal, EPS would have been Rs.27.58 as against guidance of Rs.26.63, a YoY growth of 34 percent.

‘Our operating margins (33 percent) during the quarter increased primarily due to depreciation of rupee, which was to some extent offset by the depreciation of other major currencies against the US dollar,’ Infosys Chief Financial Officer V. Balakrishnan said in the statement.

The company and its subsidiaries added 30 new clients during the quarter.

On the hiring front, though the gross addition was 5,997 employees, the net addition was 2,772 as against 10,117 and 5927 a quarter ago and 11,683 and 8,100 a year ago. The total number of employees is 103,078 as on Dec 31 as against 88,601 a year ago.

‘We have seen a decline in attrition this quarter to 11.8 percent from 12.8 percent in the previous quarter and 13.7 percent a year ago,’ HRD and education & research head T.V. Mohandas Pai pointed out.

The company has also enhanced investment in training and certification as part of its effort to improve productivity and capability.

The company’s cash reserves, including investments in liquid mutual funds and deposits has shot up to Rs.96.86 billion from Rs.79.33 billion a year ago.

‘Our robust and flexible operating and financial models position us well in the current uncertain economic environment,’ Balakrishnan asserted.