The Telegraph
Since 1st March, 1999
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Infy number magic stuns all

Bangalore/Mumbai, Jan. 11: Infosys Technologies — the country’s second largest software exporter — kicked off the earnings season for India Inc in the third quarter with a sterling 51.5 per cent year-on-year growth in net profit at Rs 983 crore, but the Street walloped the stock in early trading because of the company’s muted guidance for the fourth quarter.

The third-quarter results easily beat the Street’s estimates but the worry was that a surging rupee could skewer prospects in the fourth quarter.

Infosys, which had plunged to a low of Rs 2,100 in early trade, bounced back to settle Rs 14.25 (or 0.66 per cent) higher at Rs 2,183 against previous close of Rs 2,168.75 with over 10 lakh shares traded. It surged to a high of Rs 2,214. The stock, which lost as much as 3.1 per cent at one stage, came off its lows to surge to a high of Rs 2,214.40.

The software giant reported a 44.4 per cent rise in revenues at Rs 3,655 crore even as it added 43 clients and ramped up its overall employee base to 69,432.

The company’s net profit margin stood at 26.89 per cent versus 26.95 per cent quarter-on-quarter and operating profit margin at 32.72 per cent compared with 32.13 per cent last quarter.

Its BPO arm, renamed Infosys BPO, saw a 20 per cent quarter-on-quarter growth.

“Our investments in enriching and synergising our portfolio of services have created compelling value propositions for our clients,” CEO and MD Nandan Nilekani said.

COO and joint MD S. Gopalakrishnan said the company had delivered double-digit revenue growth in dollar terms for the third consecutive quarter during this fiscal.

“We have seen accelerated growth in Europe, which continues to be a key focus market for us,” he added.

But there was a couple of worries for the company: a surging rupee knocked 200 basis points off the operating margins.

The guidance for the full year ended March 31 and the fourth quarter were fairly modest showing less than half a per cent revision over the guidance issued last October. It forecast revenues between Rs 13,910 crore and Rs 13,919 crore for the full year and between Rs 3,789 crore and Rs 3,798 crore for the fourth quarter.

The weak guidance left analysts a little disappointed. “The fourth quarter implies a 4.9 per cent growth in dollar terms and 3.9 per cent in rupee terms,” said Citigroup analysts.

But the analysts said the biggest positive sign in the results was the fact that offshore pricing had improved 1.7 per cent sequentially while onsite pricing had risen 1.9 per cent.

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