Infosys, on Friday, reported a 3.5 per cent rise in net profit to Rs. 2369 crore for the second quarter. Revenues grew 2.5 per cent to Rs. 9,858 crore on a sequential basis. For the year ended March 31, 2013, the company projected earnings of Rs. 39,582 crore, lower by two percentage points compared to the projection made in the first quarter.
CEO and Managing Director S. D. Shibulal maintained, as he had in the last several quarters, that the company continued to face an international economic environment that is ‘challenging’.
On a year-on-year basis, net profit rose by 24.3 per cent to Rs.2,369 crore . The company’s revenues increased by 21 per cent to Rs.9,858 crore from Rs. 8,099 crore in the year-ago period.
Revenues in dollar terms in the second quarter amounted to $1.797 billion, an annualised increase of 2.9 per cent. Net income after tax amounted to $431 million, an increase of 4.9 per cent. Mr. Shibulal said revenues from Zurich-based SAP implementation and management consultancy Lodestone, which the company acquired in September, was not reflected in Infosys’ revenues. “This deal has not been closed yet,” he said. “Revenues of these entities will be reflected in our next guidance,” he clarified.
EPS guidance reset
The company also reset its earnings per share guidance for the full year, from the earlier forecast of $3.03 to at least $2.97 at the current exchange rate. In line with this, it also reduced its full-year rupee-denominated EPS from Rs.166.46 to Rs.160.61. The full-year revenue guidance (in dollar terms) remained unchanged, at $7.34 billion, an increase of 5 per cent.
Mr. Shibulal claimed that revenue growth was ‘widespread’ during the last quarter. Revenues from the top five clients grew by 7.8 per cent, top 10 by 5.7 per cent, and top 25 by 5 per cent.
Operating margins dipped by 1.6 percentage points during the quarter. Mr. Shibulal attributed the decline mainly to the increased costs of servicing of “niche” lines of business where the company sub-contracts work. He said these were mainly in the consulting space, which, in the short-term, necessitated contracting out work.
The company added 39 new clients, 14 of them in the financial services space. The company won six deals in the business and IT operations space, including two deals each worth more than $200 million – one from Harley Davidson, for which the company has set up a development centre. The company made a net addition of 2,610 employees during the quarter. Mr. Shibulal said the company had decided to increase compensation – by six per cent in India and 2-3 per cent on overseas locations.
Asked if this would increase costs and result in further pressure on margins, CFO V. Balakrishnan said the company had “other cost levers” that it could use to keep margins under control. He said the company had indicated in July that its margins would dip by two percentage points during the year.
“We expect this despite the wage hike,” he said.
Infosys also announced that its CFO V. Balakrishnan would be stepping down as CFO on October 31. Mr. Balakrishnan would continue to remain on the board, and would be succeeded by Rajiv Bansal, currently Vice President, Finance, on November 1, 2012.
Mr. Balakrishnan would be in charge of three lines of business – Infosys BPO, which is growing at 18 per cent, the India Business Unit and the financial services product Finacle.
Keywords: Infosys Q2 results