Infosys said on Friday that it still faces challenges in its outsourcing business as it reported lower-than-expected profits in the second quarter. The company, however, marginally raised its outlook for the full fiscal.

India’s second largest IT outsourcer logged a net profit of Rs 2,407 crore, a growth 1.6 per cent year-on-year and 1. 4 per cent sequentially.

Analysts said the net profit would have been higher but for the one-time charge of Rs 219 crore for visa-related matters.

Interim dividend

The company also announced an interim dividend of Rs 20 per share, a 400 per cent increase for the first half of the fiscal.

Further, the company revised its revenue guidance, or forecast, for the fiscal to 9-10 per cent from 6-10 per cent.

“We base our outlook on the current visibility as the third and fourth quarters tend to be soft, due to holidays and slowdown in decision-making for new IT budgets,” CEO S. D. Shibulal said.

The company’s CFO, Rajiv Bansal, said several issues need to be addressed in the next few quarters, including investments in people and geographies.

The market reacted to the results positively and the Infosys stock touched a 33-month high to close at Rs 3,274 or 4.7 per cent up.

Analysts, upbeat with the results, said the 3.8 per cent growth in dollar terms to $2.06 billion sequentially was a positive.

“These are healthy numbers with dollar revenues significantly ahead of estimates,” said Ankita Somani, analyst at Angel Broking.

dollar revenues

However, while the dollar revenues exceeded expectations, net profit in dollar terms declined to $383 million or 8.4 per cent on a sequential basis and 11.1 per cent year-on-year.

IT analyst and former Anand Rathi vice-president for equity research A. K. Prabhakar felt that this decline comes as a downer but since the company’s cost of sales, selling, marketing and administrative expenses rose sharply this quarter, it might be a one-off expense.

Shibulal told newspersons that the company is looking at these as investments in a bid to grow aggressively in markets, such as the US where it gets in excess of 60 per cent of its revenues.

(This article was published on October 11, 2013)
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