With operating margins falling and salary costs shooting up significantly, Infotech Enterprises witnessed a lower net profit in the fourth quarter and for the whole financial year 2010-11.
The company, which crossed the Rs 1,000-crore mark by achieving a turnover of Rs 1,188 crore for the year attributed the decline in net profit to huge salary hikes and hiring of 771 laterals (experienced people). Salary costs went up to Rs 746 crore (Rs 543 crore) in the year.
Investment on sales and marketing teams for its engineering services too put pressure on margins. Operating margins and PAT were disappointing, Mr B.V.R. Mohan Reddy, Chairman and Managing Director, said.
Operating margins
As a result, operating margins fell to 14.3 per cent (21.6 per cent) for the quarter and to 15.2 per cent (22 per cent) for the full year.
The net profit for the fourth quarter ended December 31, 2011, fell to Rs 40 crore from Rs 51.34 crore in the same quarter last year, though its revenues went up to Rs 326 crore from Rs 244 crore during the period. For the full year, net profit dwindled to Rs 140 crore (Rs 171 crore) on a turnover of Rs 1,188 crore (Rs 953 crore).
The board announced a dividend of 25 per cent of Rs 1.25 for a share of Rs 5 each.
Addressing a press conference here on Wednesday, he said the worst was over with regard to pressures on margins. “We expect that margins would go up this financial year. It would back to the 18 per cent mark reaching it as it was earlier,” he said.
He, however, did not indicate a timeline on this. On the growth rate for the financial year, he said it would be more than the 18-20 per cent predicted by Nasscom.
The company has cash reserves of Rs 380 crore
Hiring plan
With its strategy to hire laterals in 2010-11 impacting its margins, the company said it is going to add 1,000 freshers in the year. “We have given offer letters for 600. We will complete the remaining during the year,” he said.
Overall, the company would have a net addition of 1,770 employees that would take the total to 10,000 by the year-end. It, however, would recruit 3,000 more factoring in an attrition rate of 16 per cent. It was going to create 1,700 seats at its facilities in Visakhapatnam, Kakinada and Noida.