Infy reports 14% growth in net & 24% in revenue

Kris shrugs off market disappointment

But Infy CEO Kris Gopalakrishnan shrugged  off the disappointment saying the performance was on expected lines and was subject to seasonal vagaries. He stressed that the company had done better than earlier projections and the all-round performance was satisfactory by various key parameters.

The Bangalore-based IT firm reported a revenue of Rs 7,106 crore for the quarter ending December 31, 2010, 24 per cent higher than the same quarter last year (Y-o-Y). But the quarter-on-quarter (Q-o-Q) growth was 2.3 per cent in rupee terms.

Its net profit after tax at Rs 1,780 crore, represented a Y-oY growth of 14 per cent, which the analysts said was at the lower-end of their estimates. On Q-o-Q basis it was 2.5 per cent higher. Infy’s net profit margin in December 2010 quarter at 25 per cent was slightly lower than 27 per cent it had in the same quarter last year. 

Company officials said following three strong quarters, a relatively softer profit growth in Q3 was expected as clients had spent through out the year. Without a ‘budget flush’ – that is, clients stepping up spending towards the yearend to exhaust the budget, said Gopalakrishnan.   

Listing other positive signs Gopalakrishnan said, discretionary spending had made a comeback after the recession and clients had also begun to spend more on growth rather than cost cutting. “Next year will be a normal year for IT services and the industry is expected to grow between mid-to late teens,” he added.  

However, he said there were elements of uncertainty in the macro climate in the form of sovereign default in Europe and large unemployment in the US. “If something goes wrong, there would be a domino effect and adverse impact on the industry,” he said.

More clients

Infy added 40 clients in the quarter, 13 more than what it added last quarter. The contribution of top 10 clients to revenue declined from 26.7 per cent to 25.7 per cent indicating a broader spread of the revenue base.

While the number of deals are increasing, the size of the projects are getting smaller, the company executives said. The smaller deal sizes may reflect lingering uncertainty, budgetary constraints or a possible shift towards multi sourcing.

The revenue mix of the company indicates that it is making progress in its effort to outgrow the traditional labour arbitrage model, the mainstay of the Indian IT services business. Infy COO Shibu Lal said transformation services contributed to 25 to 30 per cent of revenue, and interestingly, the income from products crossed 5 per cent in the quarter.

The new engagement models, which allow clients to turn fixed cost to variable and achieve scale, contributed eight to nine per cent. 

The company added 11,067 employees of which 5,212 were laterals, which the executives claimed was the highest in the industry. But it also lost 5,756 employees pushing attrition for last twelve months to 17.5 per cent. Utilisation dipped marginally to 80.7 per cent from 81.2 per cent in the pervious quarter. But the executives said they were comfortable with a utilisation rate of 78 to 80 per cent. 

The revenue from the BPO business of the company at Rs 383 crore in Q3 was 15 per cent higher Y-oY and the number of employees has declined from 18,560 to 17,978. Infosys BPO CEO Swami Swaminathan said the company hired less in Q3 to improve operational efficiency.

Giving future guidance the company said it expects to grow by 20.5 per cent to 20.8 per cent for the entire fiscal 2011 touching revenue of  Rs 27,408 crore to Rs 27,481 crore. This is higher than the guidance of 16 to 18 per cent growth, the company had given when the current fiscal began, reminded Gopalakrishnan.