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Guarded Infy growth guidance

Mumbai, April 15: Infosys’s net profit for the fourth quarter of 2013-14 surpassed analyst expectations, but the IT giant gave a conservative revenue guidance for the current fiscal and listed a number of headwinds that it would have to negotiate in 2014-15.

The country’s second largest IT services exporter posted a 25 per cent jump in consolidated net profit at Rs 2,992 crore compared with Rs 2,394 crore in the corresponding quarter a year ago — higher than analyst estimates of around Rs 2,800 crore.

However, it gave a dollar revenue growth guidance of just 7-9 per cent for the fiscal, against 11.5 per cent growth last fiscal. The guidance was also much lower than industry body Nasscom’s forecast of 13-15 per cent for the fiscal. The IT major’s stock ended the day 0.76 per cent higher at Rs 3,260.45 on the BSE.

Infosys, which had been disappointing the markets by its poor performance relative to peers such as TCS, has been on a comeback trail particularly after the return of N.R. Narayana Murthy to its helm in June last year.

Expectations were, however, muted ahead of the results of the fourth quarter as this is traditionally a lean season. Moreover, the senior management had cautioned that tight spending by some of its clients might result in a muted performance on the revenue front.

Revenues of the Bangalore-based company in dollar terms during the quarter declined 0.4 per cent sequentially to $2,092 million while in rupees, it was lower by 1.2 per cent to Rs 12,875 crore. The fall in revenues was largely on account of a drop in onsite volumes (man hours billed).

Revenues for 2013-14 were placed at nearly $8.25 billion, a growth of 11.5 per cent over the preceding year — in line with the company’s forecast that the growth in dollar revenues will come in at the lower end of guidance (11.5-12 per cent) for 2013-14.

The guidance for the current fiscal, though low, was in line with the estimates of 6-8 per cent from the company.

S.D. Shibulal, managing director & CEO, Infosys, said the single digit revenue growth guidance had been given after taking into account the trend seen in the third and fourth quarters of 2013-14.

He said that though the overall deal pipeline had improved, clients were taking a longer time to make their purchase decisions. Further, client appetite for discretionary spending continues to remain limited.

Operating margin last fiscal fell to 24 per cent from about 26 per cent a year ago, reflecting the concern of Narayana Murthy at an analyst’s meet in February.

Employee attrition is also posing problems. It went up to 18.7 per cent for the year from 16.3 per cent.

Infosys said it would now pay a higher dividend from this fiscal: the payout ratio will be 40 per cent of post-tax profits against 30 per cent earlier. The board of directors today declared a final dividend of Rs 43 per share.

 
 
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