This rise is after a Rs 730-crore increase in projected revenues in the first quarter.

Explained by key drivers

Though the revenues in the second quarter rose 15.3 per cent on a sequential basis, the operating profit margin at 32.1 per cent remained stable during this period. Apparently, a few key elements are working in favour of the company:

Pricing stability: In the latest quarter, the onsite and offshore billing rates rose by 1.7 per cent and 0.7 per cent, respectively. The management has said that there has been a marginal rise in billing rates, with new clients coming in at 4-5 per cent higher rates over the past three months. Increase in billing rates is, however, not a trend yet.

Shift towards offshore: In the course of this quarter, the offshore revenue mix improved by 2 percentage points to 50.2 per cent on a sequential basis.

The strong offshore volume growth of over 15 per cent not only reflects that offshore is getting mainstream, but also the flexibility available to vendors such as Infosys to mix and match its service offerings, say, between enterprise solutions, consulting, application development, maintenance and testing.

Scalability in client addition: Infosys has not only enjoyed a fairly strong overall client addition in the latest quarter, it has added more clients in the $5, $10 and $20 million category than its key frontline peers.

This is further proof that offshore is getting mainstream, especially in the US.

... in recruitment, too: Despite adding about 5000 employees in the latest quarter, Infosys has managed to keep the utilisation levels (including trainees) above 70 per cent, and, still maintained operating margins in line with the first quarter.

The outsourcing rhetoric has come down to a large extent in the run-up to the US Presidential elections. The H1B visa cap of 65,000, which was filled up on the first day this year, too may not pose any constraint for Infosys for the next few quarters as it has over 10,000 visas at present. Finally, concerns about rupee appreciation, too, are largely non-existent.

At the same time, Infosys remains exposed to all its medium-term challenges such as competition from multinational vendors such as Accenture or IBM Global and the ability to successfully widen the range of service lines and offerings, along with the success of their consulting foray.

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page