 "Street cheers Infosys' 21.6% profit growth, Shibulal says he's leaving behind stronger co for Sikka")
India’s second largest IT major Infosys today surprised Dalal Street with a better than expected net profit. It reported a 21.6 percent year on year rise in profit at Rs 2.886 crore on large deal wins during the first quarter of the current fiscal year.
While Infosys has retained its yearly revenue forecast, the company says the attrition rate is “worrisome”.
The company’s stock shot up 3 percent in opening trade to Rs 3,376 as the company’s net profit for the first quarter washigher than the consensus estimate of Rs 2,667 crore. Secondly, the company retained its FY15 dollar revenue guidance of 7-9 percent.
The company’s revenue grew marginally by 0.8 percent quarter on quarter to Rs 12,770 crore for the quarter ended 30 June, 2014. But operating margins were the big surprise, which came in at 25.1 percent against expectations of 22.8 percent.
Dollar revenues grew to $2113 million, lower than estimates of $2142 million, but Infosys retained its FY15 revenue growth outlook at 7-9 percent.
Most analysts had expected Infosys to disappoint on the margins front due torupee appreciation (3 percent) and a wage hike (offshore wages hiked 6-7 percent and onsite 1-2 percent) given by the company in the last quarter.
However,Q1 is a seasonally strong quarter for IT companies due to pick up in client spending and revival in North America. Infosys saw a 2.7 percent growth in its North American business and added 61 clients in the first quarter of the current fiscal of which 12 were $100 million clients.
“We saw positive trends in our large deal wins during the quarter. We believe that this momentum will hold us in good stead as we focus on increasing volumes,” said UBPravin Rao, COO of Infosys.
However, employee attrition rate which rose to 19.5 percent from 16.9 percent a yearearlier, is a big worry for the company.
“We are implementing various initiatives to retain good talent,” Rao said.
“We continue to enjoy the confidence of our clients by demonstrating superior execution capability and value realization.” said S.D Shibulal, CEO and Managing Director. “As I transition the CEO mantle to Vishal, I am confident that he will leverage this strong foundation to take Infosys to greater heights. I wish him the very best,” he added.
Highlights:
North America grew by 3.7% sequentially; and also in constant currency.
Europe declined by 1.1% sequentially; and 1.3% in constant currency.
India declined by 6.9% sequentially; and 8.9% in constant currency.
Rest of the world grew by 1.9% sequentially; and declined by 0.8% in constant currency.
Industry segment - growth
Financial services and insurance grew by 1.8% sequentially
Manufacturing grew by 2.6% sequentially
Retail, CPG and Logistics grew by 2.1% sequentially
Energy Utilities and Communications grew by 1.6% sequentially; and 0.7% in constant currency.
Utilisation rate
The company’s utilisation rate (including trainees) rose to 74.8 percent from 72.9 percent in the previous quarter.
Utilisation rate( excluding trainees) rose to 80.1 percent from 76.7 percent in the previous quarter.
Employee addition
The company added 11,506 employees (gross) during the quarter
EPS
EPS for quarter was Rs 50.1,lower than last quarter due to investment in new visas, compensation increase and rupee depreciation
What the management said
Co has completed transition to Infosys 3.0
Challenges over last three years are now behind us, said Infosys’ Shibulal . " Have not lost a single client due to these challenges," he said, adding that he is leaving a stronger Infosys behind for Vishal Sikka.
Co has won five large outsourcing deals in first quarter
Volumes increased sequentially by 2.9 percent, significantly higher than the last two quarters
Co has settled all visa cases in the US, said Shibulal
Co contributed $8 million to Infosys Foundation as CSR in the first quarter
7-9 percent is the right revenue guidance right now
Cash in hand at the end of Q1 stood at $4.9 billion
Certain challenges in working with public sector organisations in India. India business will grow at fairly slower pace
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