Companies

Infy in line, Q1 net profit rises 21% to ₹2,886 cr

OUR BUREAU Bangalore | Updated on March 12, 2018

Happy Infosys CEO SD Shibulal and CFO Rajiv Bansal at a press meet to announce the first quarter results, in Bangalore, on Friday. GRN SOMASHEKAR

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S D Shibulal, CEO and Managing Director, Infosys.

infosys

Revenue up 13.3%; guidance retained; 5 new deals signed; but attrition at all-time high

Infosys surprised the market with better-than-expected revenues and net profit on the back of strong volume growth and improved operating margins.

Net profit grew 21.6 per cent to ₹2,886 crore while revenue increased 13.3 per cent to ₹12,770 crore, year-on-year. Operating margins were 25.1 per cent this quarter compared with 25.5 per cent on a sequential basis. Infosys had expected the margin to dip by 2 per cent to 2.5 per cent.

Infosys has decided to retain its annual revenue guidance for FY15 at 5.6-7.6 per cent in rupee terms and 7-9 per cent in dollar terms, which is still much lower than Nasscom’s estimates of 13-15 per cent growth in dollar terms, for the industry.

Infosys signed five new contracts, with a total value of $700 million, and added 61 clients during the quarter. With a net addition of 879 employees, the total headcount of the company stood at 1,61,284 as of June 30. Earnings per share were ₹50.51 for the quarter.

Attrition woes

However, the quarter saw the company battling with an all-time-high attrition rate of 19.5 per cent this quarter, up from 16.9 per cent in the same quarter last year, and 18.7 last quarter.

“The high attrition rate means that in two years, Infosys could potentially have a completely new set of employees,” said Sundararaman Vishwanathan, Manager Consulting, Zinnov.

Outgoing CEO and MD SD Shibulal, said the demand environment was largely stable and pricing was also stable in most areas except in the case of commoditised services and large deals, which are price sensitive. “We are investing in emerging areas such as infrastructure services, emerging technologies and newer markets like Continental Europe. With all this, Infosys is stronger today than a few years ago. We have laid the foundation that will take Infosys to greater heights.”

Ashish Chopra, IT analyst, Motilal Oswal Securities, said the Q1 revenue was in line and sequential volume growth of 2.9 per cent was healthy. “Infrastructure Management Services grew 12 per cent sequentially, contributing 44 per cent to incremental revenues, suggesting that the company’s efforts and focus on the traditional commoditised Business IT Services segment is seeing some fruition.”

Compensation rise

The company attributed its sequential drop of 0.8 per cent in revenue and 3.5 per cent in net profit to the annual compensation increase effective April 1, the ₹48-crore payout to Infosys Foundation to conform with Government CSR norms and higher visa costs incurred during the quarter.

Concurring that the results were in line with estimates, Daljeet S Kohli, Head of Research, IndiaNivesh Securities, said: “The surprise came from the less-than-expected contraction in the EBIT margin despite the wage hike and visa related costs. This illustrates that cost optimisation initiatives taken up earlier have started yielding results.” On Friday, the Infosys stock rose 1 per cent to close at ₹3,325.

Published on July 11, 2014

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