The Telegraph
Saturday , July 12 , 2014
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Healthy rise in Infy profit

Mumbai, July 11: Infosys has posted a 21.6 per cent growth in first-quarter net profit, surprising the Street by beating estimates on both the profit and margin fronts.

The Bangalore-based IT services entity, which is set to get a new CEO from August 1, declared a net profit of Rs 2,886 crore compared with Rs 2,374 crore in the corresponding period of the previous year on higher orders from the US and Europe.

Analysts had expected the company to post a net profit of Rs 2,700 crore. Infosys also reported operating margins of 25.1 per cent, down 34 basis points over the preceding quarter. Analysts had forecast that the margin would fall by 200 basis points because of salary hikes and higher visa costs.

Infosys retained its revenue growth guidance of 7-9 per cent in dollar terms for the current fiscal. This is much below Nasscom’s projection of 13-15 per cent in dollar terms.

“We continue to enjoy the confidence of our clients by demonstrating superior execution capability and value realisation,” S.D. Shibulal, CEO and managing director, who is set to retire at the end of this month, said.

Consolidated revenue for the quarter showed a growth of 13.3 per cent at Rs 12,770 crore against Rs 11,267 crore in the same quarter of 2013-14.

Rajiv Bansal, chief financial officer of Infosys, said the better than expected performance was on account of cost management, increasing productivity and better utilisation of resources.

This, he added, partially offset the impact of a hike in compensation for its employees in the quarter, which also saw promotions being handed out to a few.

The markets reacted positively to Infosys’s numbers with the company’s stock finishing higher by 1 per cent, or Rs 32.90, at Rs 3,325.80 in a weak market.

Ankita Somani, analyst at MSFL Research, said for Infosys to meet the higher end of its dollar revenue guidance, the required rate of growth per quarter for the next three quarters would be 3.5 per cent.

“We believe this number is on the higher side for the second half of 2014-15, keeping in view that this period is relatively softer than the first half and Infosys has been continuously lagging behind peers in terms of revenue growth rates,’’ she added.

However, the company’s employee attrition continued to be a matter of concern as it hit a high of 19.5 per cent in the April-June quarter from 16.9 per cent in the year-ago period.

While the attrition rate is worrying, Infosys chief operating officer U.B. Pravin Rao said that the company was implementing various initiatives to retain good talent.