The Hindu Business Line : More deals, new clients take Infosys Q3 net up 25%

Bangalore, Jan. 11 Driven by multi-year, multi-million dollar deals, IT major Infosys Technologies reported a 25.2 per cent rise in net profit at Rs 1,231 crore for the third quarter ended December 31, 2007 compared to Rs 984 crore for the year-ago quarter.

Revenues rose by 16.9 per cent to Rs 4,271 crore (Rs 3,655 crore). The company saw a sequential growth in revenues of 4 per cent from Rs 4,106 crore.

In its guidance for fiscal ending March 2008, Infosys sees a growth of 19.7-19.9 per cent in its revenues (Rs 16,627-16,651 crore) and predicts earnings per share (EPS) at Rs 81.07, a rise of 17.2 per cent. The guidance for the year assumes current pricing.

The company’s revenues crossed $3 billion in the first nine months of 2007-08 and earnings per share for the quarter recorded a year-on-year growth of 22.1 per cent to Rs 21.54. Profits before interest, taxation and depreciation grew 16.4 per cent year-on-year to Rs 1,392 crore.

Operating margins expanded to 32.5 per cent from the September 2007 quarter figures of 31.2. The company said that various levers such as variable pay for senior staff and scale benefits contributed to the rise of margins.

New clients

Infosys this quarter added 47 clients, four of whom were Fortune 500 companies. New clients include a European bank, a top global brokerage firm, a leading healthcare firm, one of the world’s largest investment banks, and a leading retailer. “We see several opportunities for growth in the marketplace and have concluded several multi-year, multi-million deals during the quarter,” the Chief Executive Officer and Managing Director, Mr S. Gopalakrishnan, said.

The company has seen good growth from Europe. It sees business opportunities in the markets of Latin America, South America, China, and West Asia. Interestingly, Infosys also sees significantly higher IT spending from domestic clients.

Seeking to quell fears on a slowdown in the US economy, Mr Gopalakrishnan said, “There is no panic seen among clients. No projects have been cancelled. We do not see any pricing concerns.”

In fact, the company has seen pricing increases of between 3 and 4 per cent for existing clients and between 2 and 3 per cent for new clients. It has also voluntarily settled with the California Division of Labour Standards Enforcement towards overtime payment to certain employees in that State to a tune of $26 million. Mr Pai said, “This is a one-time payment.”

Nearly 96 per cent of revenues come from repeat business and about 30 per cent from maintenance projects.

Selling and marketing expenses for the quarter ended December 31, 2007 stood 27.6 per cent, lower at Rs 205 crore compared to Rs 283 crore in September 2007, and 13.1 per cent lower than the Rs 236 crore spent in the December 2006 quarter.

Explaining this, the Infosys Chief Financial Officer, Mr V. Balakrishnan, said, “In the September quarter, we had earn-out payments for the consulting arm. This time around, that is not there.”

The company is expected to have a gross employee addition of 31,000 this year, revising the earlier estimate upward by 1,000. This quarter, it added 11,683 employees (gross).

The impact of the rupee appreciation was offset by productivity increase and higher billing rates, said Mr Balakrishnan. Revenue productivity, which on average has seen a 1 per cent increase in the last seven quarters, recorded a 0.8 per cent increase in the December 2007 quarter. More reports on page 4