Infosys beats street predictions, posts 17% rise in Q1 net

Sensex bellwether Infosys Technologies beat street estimates to post a modest profit growth for the June quarter over a year ago, but a strengthening rupee prompted the company to pare its rupee forecast for the full year-ahead.

However, the company reported sequential earnings de-growth for the second successive quarter amidst persisting volume decline and pricing pressure while stating that the uncertainty in business environment would continue till an expected recovery in 2010.

Infosys registered a 17.3 per cent year-on-year growth in net profit at Rs 1,527 crore for June quarter, much lower than March quarter’s growth of 29.1 per cent. Revenues for the quarter grew 12.7 per cent to Rs 5,472 crore, almost half the rate at which it grew in March quarter. Sequentially, the June quarter net profits declined 5.3 per cent, while revenues fell 2.9 per cent over the March quarter.

“Given that the short-term environment is still challenging, we have to be cautious,” said Mr S. Gopalakrishnan, CEO, Infosys. “There is still volatility and uncertainty in the environment.”

The rupee which gained 5.5 per cent against the dollar in the June quarter prompted the company to reduce its full year forecast to Rs 21,416 crore from Rs 21,747 crore. In April, the company had projected its fiscal 2010 revenues to be between Rs 22,066 crore and Rs 22,898 crore.

However, Infosys increased the lower-end of its dollar term guidance on the back of the dollar gaining against the Euro, the Pound and Australian dollar. It now expects revenue of $4.45 billion to $4.52 billion, compared with its previous estimate of $4.35 billion to $4.52 billion.

“The better than expected volume growth and favourable cross currency movements helped us to beat the dollar-term guidance,” said Mr V. Balakrishnan, CFO, Infosys. The company posted dollar term revenue of $1,122 million, beating its estimate of $1,060 million and $1,080 million. In rupee terms, it beat the lower-end of its guidance of Rs 5,379 crore and Rs 5,480 crore.

For the September quarter, Infosys expects income in the range of Rs 5,318 crore and Rs 5,413 crore.

Volumes declined by 1.1 per cent, better than the company’s estimates of three to four per cent. Pricing decreased by about 5 per cent. “Most of the price negotiations are behind us, but that does not mean that such re-negotiations will not surface again,” said Mr S.D. Shibulal, COO.

The lower volumes have forced the company’s utilisation (excluding trainees) to a low of 70.9 per cent, compared with 74.5 per cent in the previous quarter and 72.2 per cent in the year-ago period. Infosys also saw revenue from its top client, British Telecom, drop below 5 per cent during the quarter. Though Infosys added 27 new clients during the quarter, one of the lowest in recent times, the repeat business accounted for 98.7 per cent of its revenues.

Infosys said though the pipeline looks good, the delay in decision making was worrisome. The pace of decision making comes down every time there is negative news in the macro environment. Decision making has not accelerated over the quarters.

Source: http://www.thehindubusinessline.com/