Infosys beat street expectations to post healthy first quarter results. It topped this with an unchanged dollar revenue outlook, lifting its stocks to a three-month high.

The IT bellwether’s first quarter revenues grew 17.2 per cent to Rs 11,267 crore over the corresponding previous period. The net profit rose 3.7 per cent to Rs 2,374 crore in the same period. Sequentially, while revenues were up 7.8 per cent, the net profit slipped by nearly one per cent.

The 2.7 per cent sequential growth in dollar revenue to $1.99 billion was another positive for the company as some analysts had indicated that it would at best be flat. The dollar revenue outlook for 2013-14 was the same, in the 6-10 per cent band, surprising the market pundits who had indicated that the top end of the guidance will be revised downwards to around 7.5 per cent. The rupee outlook was, however, recalibrated to a higher 13-17 per cent band. Infosys CFO Rajiv Bansal threw in a note of caution stating that the results should not be seen as a secular trend for the next three quarters because there are lots of intangibles that are yet to pan out.

But markets cheered the results with Infosys stock ending the day with an 11 per cent gain to Rs 2,802.75.

An analyst with Religare Institutional Research, Rumit Dugar, said Infosys’ performance was laudable. “Infosys performed well on most operational metrics. We believe a healthy Q1 performance increases the probability of achieving the top end of the guidance.”

There were several positives in the first quarter results for the company: Operating margins grew at 23.4 per cent same as the last quarter in spite of wage increases. But the same wage hike is expected to pull down the margins 300 basis points in the next quarter and 240 basis points for the full year, according to Bansal.

This is also the first quarter after N. R. Narayana Murthy’s return. On June 1, founder Narayana Murthy came back to the company as executive chairman to revive the company.

Bansal also said that no new freshers will be recruited during the next quarter but some of those recruited from campus earlier will be given jobs during the quarter. Also, a certain number of laterals will be hired depending upon the business needs.

Volume growth (increase in man-hours billed) was at 3.4 per cent compared with 1.8 per cent sequential growth in the previous quarter while that in the IT services grew 1.8 per cent. Infosys added three $100-million clients during the quarter, adding a total of 66 clients, 10 more than the previous quarter. Revenues from its largest region, North America, grew 4.9 per cent sequentially. But Europe declined 3 per cent indicating that still a lot more work needs to be done in that region.

Infosys CEO Shibulal said the company was “cautiously optimistic” about the future citing macroeconomic uncertainties in developed markets as well as fresh regulations which could restrict business growth.

On the issue of Immigration Bill, Shibulal said that they are putting together a contingency plan in case the Bill in its current form becomes a law. “We are talking with clients to see that there are no service interruptions,” he pointed out. As per the US Immigration Bill, visa costs are expected to go up by about $5,000 per application while making it mandatory for higher wages to be paid for H-1B visa holders.

venkatesh.ganesh@thehindu.co.in

giriprakash.k@thehindu.co.in

(This article was published on July 12, 2013)
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