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An increase of 44 per cent in salary costs has weighed down on the operating margins and resulted in lower net profit of Infotech Enterprises.
Net profit of the company dipped to Rs 27 crore in the first quarter ended June 30, 2011, as against Rs 33 crore in the same quarter last year.
Salary cost has gone up to Rs 227 crore in the quarter against Rs 157 crore in the comparable quarter last year, showing an increase of 44 per cent and causing severe strain on operating margins.
“Steep increase in salary costs was due to addition of 379 employees in the US in the comparable period. It went up to 1,065 from 686. In Germany too, we added 113 people. When you compare salary costs sequentially, the increase was only Rs 20 crore,” Mr B.V.R. Mohan Reddy, Chairman and Managing Director of Infotech Enterprises, told Business Line .
“Being the first quarter of the year, we gave annual increments to our associates. This is the main reason for operating margin to drop by 180 basis points over the last quarter to 12.50 per cent. Though the net impact of salary hikes was still higher at 280 basis points, we were able to contain the overall impact on margins by increasing volumes and managing margin levels,” he said.
Revenue for the quarter increased by 37 per cent to Rs 347 crore from Rs 253 crore last year. Operating margin stood at 12.5 per cent as against 16 per cent in the comparable quarter last year.
The company expected that the tax burden would up to 33.3 per cent this year from 18 per cent, following withdrawal of tax sops.
“We are going to add 450 seats in our special economic zone by September end and another 450 by the end of March 2012. Addition of 450 seats would result in one percentage point reduction in tax outgo,” he said.
Outlook
For the full year 2011-12, the company expected to cross the Rs 1,500-crore mark in revenues and a net profit of 150 crore. “We are hoping to grow 25-30 per cent with an average operating margin of 15.50 per cent,” he said. The company planned to have gross addition of 2,600 employees in the year.
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