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Infosys turned in another quarter of uninspiring results, the third straight since January, attributing it to the weakness in demand for outsourcing services. The company also cut its rupee sales growth forecast 2 per cent (to Rs 39,582 crore) and warned that higher wages and a fluctuating rupee could impact profitability.
In another major development, the IT major’s Chief Financial Officer, V. Balakrishnan, 46, who held the post for six years, has moved to a new role and will head the India and BPO businesses. The 39-year-old Rajiv Bansal, Vice-President, Finance, will be the new CFO, from November.
Infosys results met the street expectations but the outlook guidance pushed the stock down over 8 per cent in early trading, the worst since April. After the company clarified that the guidance did not include the Lodestone acquisition, the free fall was halted and the stock settled at Rs 2,395.65, 5.36 per cent lower than the previous day’s close.
Infosys posted a 3.5 per cent increase in net profit at Rs 2,369 crore resulting in an EPS of Rs 41.46 for the second quarter. Revenues grew 2.5 per cent to Rs 9,858 crore on a sequential basis. On a year-on-year basis, net profit increased 24.3 per cent and revenues were up 21.7 per cent. The Bangalore-based IT major cut its EPS guidance for the full year, which is now expected to be at least $2.97, down from $3.03 it had forecast earlier. It has also lowered its full-year rupee EPS guidance to Rs 160.61 from Rs 166.46. Revenues are expected to be at least $7.343 billion, with a year-on-year growth of 5 per cent and 5.7 per cent on constant currency terms. “Global economic uncertainties continue to face the industry,” the company’s CEO and managing director, S.D. Shibulal said. “We are focused on high-quality growth despite global currency and economic volatility,” the outgoing CFO, V. Balakrishnan said.
At the operating margin level, the company took a hit of 150 basis points to 29.5 per cent. It added 39 clients during the quarter but lost a $300-million and a $100-million client. Infosys also declared a wage increase of 6 per cent for offshore employees and 2 per cent for onsite employees. Analysts were unforgiving of the Infosys performance.
“We are going to keep away from the Infosys stock for sometime,” Rajni Ghildiyal of Asit C. Mehta Investment Intermediates said. She said the company was walking a tightrope as it will have to post growth rates in excess of 3.5 per cent in each of the next two quarters, which are traditionally weak in nature.
> venkatesh.ganesh@thehindu.co.in;
> giriprakash.k@thehindu.co.in
>Highlights of Infosys' results
>Infosys' consolidated audited results
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