The Hindu : Business : Infosys net profit up 52 p.c. in Q3

Online edition of India's National Newspaper
Friday, Jan 12, 2007
ePaper

Business

Business

Infosys net profit up 52 p.c. in Q3

Special Correspondent

Strong rupee hits operating profit margins by 200 basis points

QUANTUM JUMP: Nandan Nilekani, Chief Executive Officer and Managing Director, Infosys Technologies, addressing a press conference at the Infosys campus in Bangalore on Thursday. — Photo: G. R. N. Somashekar

BANGALORE: Infosys Technologies posted better than expected third quarter profit growth, though a strong rupee negatively impacted its revenues and operating margins in a traditionally weak quarter.

Infosys reported a 51.5 per cent growth in its net profits at Rs. 983 crore for the quarter-ended December 2006 over the corresponding quarter last year. Revenues for the quarter grew 44.4 per cent to Rs. 3,655 crore. On a sequential basis, the revenue and profit growth stood at 5.9 and 5.8 per cent, respectively.

Infosys shares reversed early losses to close marginally higher at Rs. 2,183 on Thursday on the Bombay Stock Exchange. In a knee-jerk reaction to the earnings announcement, the stock hit an intra-day low of Rs. 2,100, before bouncing to hit an intra-day high of Rs. 2,214.

Revenue growth

A strong currency cut short Infy's expectation of a third consecutive double-digit revenue and profit growth in rupee terms. In dollar terms though, Infosys sustained a double-digit revenue growth of 10.1 per cent for the third consecutive quarter.

"We are on track and see no signs of any slowdown in the global economy. Off-shoring will be mainstream,'' Infosys CEO and Managing Director Nandan Nilekani said. "The pricing environment continues to be stable with an upward bias," he said.

Going forward, Infosys expects its revenues to grow to between Rs. 3,789 crore and Rs. 3,798 crore for the fourth quarter, a growth of over 44 per cent. For fiscal 2007, Infosys expects its income to be in the range of Rs. 13,910 crore and Rs. 13,919 crore, a year-on-year growth of over 46 perr cent, marginally higher than the earlier projections.

The rupee, which appreciated by 3.8 per cent against the dollar during the third quarter, impacted the operating profit margins (OPMs) by 200 basis points and caused a revenue loss of Rs. 145 crore.

"We have been able to offset the impact on OPMs through increased revenue productivity, licence revenues and lower sales, general and administrative (SG&A) expenses,'' said V. Balakrishnan, Chief Financial Officer, Infosys, said.

Increased revenue productivity and licence fees contributed positively to OPMs by 80 basis points each and Infosys had a positive impact of 50 basis poitns due to lower SG&A.

OPMs, as a result, were up marginally to 32.7 per cent up from 32.1 per cent in the second quarter, he said.

The improvement in OPMs, despite a strong rupee, fewer working days in the third quarter and flat utilisation rates, came as a major surprise, analysts said.

Infosys saw its volumes grow at 7.8 per cent quarter-on-quarter despite the third quarter being a seasonally weak one, which points to a robust underlying business growth, analysts said.

Adds 43 new clients

Infosys added 43 new clients to increase its overall active client base to 488. It added 6,062 employees on gross basis to take its overall headcount to 69,432, while net additions stood at 3,282. Further, the company expected to add another 5,000 in the fourth quarter, T. V. Mohandas Pai, Director, Human Resources, said.

Attrition

Infosys saw its attrition rise to around 13.5 per cent in the third quarter because of higher involuntary attrition. :Excluding the involuntary attrition, the attrition rates are well under control,'' Mr. Pai said.

Printer friendly page
Send this article to Friends by E-Mail

Business

News Update

Stories in this Section