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Infosys inspires trust

- Infotech major ups full-year guidance
Narayana Murthy in Mysore on Friday. PTI

Mumbai, Jan. 10: Infosys today raised its revenue forecast for the year after reporting a higher-than-expected 21 per cent growth in net profit for the third quarter (October-December) on improved demand in the US and Europe.

Bangalore-based Infosys had dramatically brought back co-founder N.R. Narayana Murthy last year in June to steer the company as executive chairman, following a series of disappointing quarters as the company lagged its peers in grabbing outsourcing projects.

Net profit stood at Rs 2,875 crore during the period against Rs 2,369 crore a year earlier. Revenue rose 25 per cent to Rs 13,026 crore from Rs 10,424 crore.

“We believe the global economic environment has improved and our clients are gaining confidence to invest in their strategic initiatives. At the same time we expect the budget to be stable from last year to this year. Our clients are very focused on cost optimisation even today,” Infosys chief executive officer and managing director S.D. Shibulal said in a statement announcing the results.

Infosys raised its rupee revenue growth forecast to 24.4-24.9 per cent for financial year ending March 31, from 21-22 per cent estimated earlier.

Shares of the company rose 2.84 per cent to Rs 3,548.90 on the BSE, while the Sensex rose 0.22 per cent.

In dollar terms, revenues in the third quarter grew 9.9 per cent to $2,100 million from $1,911 million a year ago. Net profit rose 6.7 per cent to $463 million from $434 million. Revenue guidance for the year has been raised to 11.5-12 per cent from 9-10 per cent earlier.

The US and Europe account for more than 80 per cent of the revenue of Indian IT exporters.

North America contributed 60 per cent of the revenue for Infosys in the third quarter and 24.9 per cent from Europe.

More clients

Shibulal said the quarter saw good client additions with 54 new customers, including a new $50-million client. The number of million dollar clients went up by 26 to 495.

Stating that pricing continues to be stable, Shibulal said: “We (however) continue to see pricing pressure on large deals and commoditised services.”

Analysts feel Infosys appears to be back on track.

“The results of Infosys were a mixed bag. While revenue matched expectations, the margins were better than expectations,” said Dipen Shah, head of private client group research at Kotak Securities.

“Infosys’ revenue was in line but operating profit margin was a positive surprise — and an early indicator of the fruition of management’s efforts towards transforming the company to a desirable Infosys,” said Ashish Chopra, IT analyst at Motilal Oswal Securities Ltd.

Infosys had liquid assets, including cash and cash equivalents, available-for-sale financial assets, certificates of deposits and government bonds, valued at Rs 27,440 crore as on December 31 against Rs 26,907 crore at the end of September.

Rajiv Bansal, chief financial officer, said: “We continue to remain focused on making investments necessary to secure and grow our future.”

Though Infosys added 6,682 employees on a gross level in the quarter, the total headcount fell 1,823 from the end of September to 1,58,404.

The attrition rate stood at 18.1 per cent on the basis of the last 12 months.

Murthy’s arrival also saw an exodus of top executives from the company, the latest being V. Balakrishnan, who resigned from the board last month.

“We believe that the impact of current high level exits could be felt in the medium term. However, a company like Infosys is system driven with a healthy management bandwidth and hence the impact will not be long lasting,” said Ankita Somani, research analyst at Angel Broking.

“The current set of results as well as guidance given is largely in line with expectations and factored in the stock, which limits a sharp upside potential for the script in the immediate future,” she said.

MURTHYSPEAK

It is sad to see many excellent people leave the company. The beauty of this company is it has a long cadre of leaders. I would say that while we wish all the people who have left us the best, we are confident this company has a long cadre of leaders, and that will not be my worry at all
on the exits

What position he will hold in Infosys, that is not for me to decide...who knows he may change his mind, he may do something else in India ó who knows, so I cannot commit what he will do in his future. Thatís not fair on my part
on son Rohan

At a point when the board of directors is satisfied that the management team, of which Iím a part of, has done it to the boardís satisfaction, Iím sure it will allow me to go back to my retired life which is clearly something I deserve
on his return

 
 
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