The Hindu Business Line : Infosys net up 52 pc in Q3

Report card
Revenues for Q3 financial year 2007 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.

Good numbers: Mr Nandan Nilekani, CEO and MD, Infosys, and Mr S. Gopalakrishnan, COO, President and Joint Managing Director, at a press conference at the Infosys Campus in Bangalore on Thursday. -- G R N Somashekar.

Bangalore, Jan. 11

Infosys Technologies Ltd posted better than expected third quarter profit growth, though a strong rupee blunted 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 Q3 financial year 2007 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.

The stock reversed early losses to close marginally higher at Rs 2,183 on Thursday on the BSE. 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, it sustained a double-digit revenue growth for the third consecutive quarter at 10.1 per cent.

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

Going forward, Infosys expects its revenues to grow between Rs 3,789 crore and Rs 3,798 crore for Q4 financial year 2007, a growth of 44.4 to 44.7 per cent. For fiscal 2007, the company expects its income to be in the range of Rs 13,910 crore and Rs 13,919 crore, a year-on-year growth of 46.1-46.2 per cent, marginally higher than the earlier projections.

The rupee, which appreciated by 3.8 per cent against dollar during the third quarter, impacted the operating profit margins (OPMs) by 200 basis points (bps) 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 Mr V. Balakrishnan, Chief Financial Officer.

Positive impact

Increased revenue productivity and licence fees contributed positively to OPMs by 80 bps each and Infosys had a positive impact of 50 bps due to lower SG&A. OPMs as a result were up marginally to 32.7 per cent up from 32.1 per cent in Q2, he said.

The improvement in OPMs, despite strong rupee, lower number of working days in Q3 and flat utilisation rates, came as a major surprise, analysts said.

Volumes grew at 7.8 per cent QoQ despite the third quarter being a seasonally weak one, which points to a robust underlying business growth, analysts said.

Forty-three new clients were added to increase its overall active client base to 488. The company added 6,062 employees on gross basis to take its overall headcount to 69,432, while net additions stood at 3,282. Further, it expected to add another 5,000 in Q4, said Mr T.V. Mohandas Pai, Director, Human Resources.

Attrition

Infosys saw its attrition rise to around 13.5 per cent in Q3 mainly due to higher involuntary attrition.

"Excluding the involuntary attrition, the attrition rates are well under control," Mr Pai said.

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