Infosys is back: ups FY14 revenue outlook to 9-10 percent

IT major Infosys today reported a flat profit but upped its full year sales guidance for FY14 to 9-10 percent from the current 6-10 percent, indicating a return of confidence at the country’s second largest outsourcer.

Second quarter profit after tax at Rs 2,407 crore lagged estimates due to aone-time visa settlement charge of Rs 219 crore.

Consolidated revenue jumped 15 percent to Rs 12,965 crore during the July-September quarter from Rs 11,267 crore in the previous quarter.

Margins of the company came in flat at 21.88 since Infosys had hiked salaries last quarter.

The stock opened 10 percent higher in pre-open trade after the company’s US dollar revenue for the quarter jumped 3.8 percent to $2066 million, higher than expectations of $2042 million. The 10 percent hike is the highest level since January 2011. However, the stock was just 3 percent higher in opening trade as investors had largely priced in better results onrising discretionary spend in the US from where the company earns over 60 percent of its revenues as well as a depreciating rupee.

“Revenue has come in much stronger than expected but guidance is not all that good. Margins have been a little disappointing due to a wage hike in the last quarter… I don’t think given the change in strategy margins are going to rise much since the rupee has been factored in at 62.50. I do not see much immediate upside to the stock from here, " said Vibhav Kapoor of IIFL.

Some of the turanorund ar Infosys could be attributed to the change of guard at Infosys rather than an improved market situation, he added.

Moreover, the turnaround is also the result of a depreciating rupee and given the same level of depreciation is not expected next year, the firm may not register the same kind of growth or profits, said Kapoor.

The Indian rupee declined 5.2 percent against the dollar in the July-September period helping pare the cost of India’s software-services exports to overseas buyers.

The rupee’s fall coincided with increased demand from clients in the US and Europe, regions that account for 80 percent of offshore IT revenue

Analysts on an average had expected the company to report a net profit of Rs 2,614 crore on revenues of Rs 12,781 crore for the quarter.

Here are some highlights:

[caption id=“attachment_835445” align=“alignleft” width=“380”] Infosys MD Shibulal with Narayana Murthy. AFP[/caption]

Infosys had recorded sales of $1991 million in the June quarter.

Revenues for the quarter rose to Rs 12,965 crore as against Rs. 11,267 crore in the previous quarter, Infosys said.

Earnings per share grew 1.4 percent quarter-on-quarter to Rs 42.12 for the quarter ended September 30, 2013.

Infosys’ Q2 North America business grew by 3.9% QoQ, while the India business declined by 2.5 percent and the European business grew 5.2 percent.

In dollar terms, the net profit was down 11.1 per cent at $383 million, while revenues grew 15 per cent to $2,060 million.

Its EBITDA increased 6.5 percent to Rs 2,837 crore vs Rs 2,664 crore while EBIT margin grew to 21.88 per cent vs 23.6 percent.

The company also declared an interim dividend of Rs 20 per share.

Infosys added 2,964 employees during the quarter, taking the gross addition to 12168 employees.

The company also won five large deals during the quarter, implying renewed aggression as it pursues bigger deals.

The company’s cash pile expanded too.Liquid assets including cash and cash equivalents, available-for-sale financial assets, and government bonds were $4.3 billion as on 30 September 2013 against $4.1 billion as on 30 June 2013.

“During the quarter we witnessed broad-based volume growth, robust client additions, five large deal wins and increased sales momentum of our big data and cloud offerings. This growth is a result of our focus on execution, which helps our clients achieve their objectives.” said SD Shibulal, CEO and Managing Director.

“We will continue with planned investments and initiatives to explore new avenues of growth. We remain watchful of the sustainability of improving global economic fundamentals”, he added.

“The global currency market remains volatile with the Indian Rupee depreciating 11% during the quarter. We have an active hedging program to minimize its impact on our margins. We will continue our focus on optimizing costs and enhancing the efficiency of our operations,” said Rajiv Bansal, Chief Financial Officer.