The Hindu Business Line : Infosys Q3 net rises 33% on higher earnings growth

Strong business model: Mr S. Gopalakrishnan (left), Chief Executive Officer and Managing Director, Infosys, and Mr S.D. Shibulal, Chief Operating Officer, at a press conference in Bangalore on Tuesday. —

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Bangalore, Jan. 13 Defying the economic slowdown, Infosys posted better-than-expected earnings growth for the December quarter aided by a weaker rupee and improved operational efficiencies, but missed its forecast in dollar terms hurt by volatile currencies.

Infosys reported a 33.3 per cent rise in net profits at Rs 1,641 crore for the December quarter, compared with Rs 1,231 crore in the year-ago quarter. Revenues rose 35.5 per cent to Rs 5,786 crore (Rs 4,271 crore).

Projecting a flattish growth for the March quarter, Infosys said it expects revenue to be in the range of Rs 5,494-5,699 crore. “The muted guidance is primarily because of the weak volumes,” said Mr V. Balakrishnan, Chief Financial Officer.

“It is a good, all-round performance in every parameter. It is a reflection of our strong business model even in a challenging business environment,” said Mr S. Gopalakrishnan, Chief Executive Officer and Managing Director. “Our model is strong and we will be able to sustain it,” he added.

New clients

Infosys added 30 new clients during the quarter, and the gross employee addition was 5,997. Mr T.V. Mohandas Pai, Member of the Board, said the number of employees joining during the fiscal has been increased to 27,000 from 25,000.

For the quarter, the blended pricing declined 6.1 per cent sequentially, and the impact in constant currency terms was 1.8 per cent. “Pricing has been impacted, but we are comfortable with the current pricing in this environment. If the situation deteriorates, pricing could get further impacted,” said Mr Gopalakrishnan.

Infosys said sentiments could improve towards the end of 2009, or early 2010, but said it would be facing a challenging environment for the next 12 to 18 months. Operating margins for the quarter was up 200 basis points to 35.1 per cent aided by a depreciating rupee and improved efficiency. For the period, selling and marketing expenses was down 9.6 per cent and general and administration expenses declined by 5.6 per cent, compared with the previous quarter.

Lower budgets

Infosys said visibility on clients’ budgets is still low. While a few budgets have got finalised, the process is likely to be complete by the middle of February. “Budgets will be down slightly or maybe constant. Companies are giving indications that this year the allocations to offshoring would increase,” Mr Gopalakrishanan said.

“The hiring being better and the hope that budgets would be finalised by the middle of February is some indication of things improving. The only concern is the pricing going negative,” an analyst said.

The company said the significant appreciation of the US dollar against major currencies such as the Pound Sterling, euro and Australian dollar has brought down the revenue reported in dollar terms, forcing it to miss its dollar guidance.

The pound has lost 18 per cent, the euro 11 per cent and the Australian dollar 23 per cent to the US dollar. Revenue in dollar terms was $1,171 million, lower than its forecast of $1,175 million to $1,220 million, the company said.

In the wake of recent concerns over corporate governance, the company said it has disclosed the amount of money it has placed in various banks to boost investor and client confidence.

“Such disclosures will act as external checks for investors to see whether the actual money is available,” Mr Balakrishnan, said.