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SAYING IT WITH A SMILE: The Infosys President, CEO and Managing Director, Mr Nandan Nilekani, at a press conference announcing the company's annual results in Bangalore on Thursday. - G.R.N.Somashekar

Bangalore , April 14

A SLUGGISH volume growth coupled with overriding client issues have forced Infosys Technologies to issue lower-than-expected earnings guidance for fiscal 2006 even as it posted a tepid fourth quarter results.

Infosys' net profits rose 53 per cent to Rs 513 crore, while revenues grew 47 per cent to Rs 1,987.32 crore for quarter-ended March 31, 2005, over corresponding last year. Sequentially, the growth in net profits and revenues was at 3.25 per cent and 5.96 per cent respectively. Onsite volumes grew by 4.6 per cent while offshore volumes rose by 6.6 per cent during the March quarter, as compared to double digit-volume growth the company used to post in the last few quarters.

After including a realisation of Rs 45 crore through a stake sale in subsidiary Yantra Corporation, Infosys' net profit for the fourth quarter of FY05 stood at Rs 558 crore. For fiscal 2005, net profits grew by 52 per cent to Rs 1,891.7 crore, while its revenues grew by 47 per cent to Rs 7,129.65 crore, over previous year.

The company has recommended a final dividend of Rs 6.50 per share (130 per cent on a par value of Rs 5 per share) for fiscal 2005 amounting to Rs 175.87 crore. Including the interim dividend of Rs 5 per share amounting to Rs 133.93 crore, the total dividend recommended for the year is Rs 11.50 per share amounting to Rs 309.8 crore. For fiscal 2006, Infosys expects income to be in the range of Rs 8,890 crore and Rs 9,029 crore, a growth of 24.7 per cent to 26.6 per cent.

Analysts said the outlook was below expectations of the market, which was looking for 30 per cent guidance.

Mr Nandan Nilekani, President, CEO and Managing Director, Infosys said: "Customers' focus on issues related to compliance of Sarbanes-Oxley Act, Anti-Money Laundering Act and the Patriot Act, would have short-term impact on the earnings".

The managements of a couple of Infosys' top 20 clients, especially in the financial services space that contributes to 40 per cent of the total revenues, are busy with internal reorganisation, while others were pre-occupied with compliance-related issues, resulting in a slowdown.

"We are hopeful of seeing traction in volume from Q2 onwards," he said.

Infosys expects the pricing to be stable, Mr Nilekani said, adding: "the trend towards offshoring continues". Infosys expects strong growth in segments such as communication service provider business and the auto and aerospace sectors, he said.

Mr T.V. Mohandas Pai, CFO, said the company does not see any major impact of the fringe benefit tax on its earnings and hence has not factored it in its outlook. Infosys has managed to maintain its operating margins at 33 per cent for the year, while its net profit margins was around 26 per cent.

The company is yet to finalise the timing for its proposed secondary offering of American Depository Shares.

Next $1-b revenue seen in 18 months

WHILE it took 23 years for Infosys to go past the $1-billion revenue mark, it may take less than 18 months for it to cross the next billion.

The scorching pace at which Infosys is growing gives an indication of the company getting several of its initiatives right. "We are beginning to see the results of various initiatives taken over the last few years," Mr Nandan Nilekani told newspersons.

He said the company's clients increasingly see it as a strategic long-term partner which can offer a wide range of services and contribute to their business goals.

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