Infy net up 24.3%, disappoints Street

Announces wage hike of upto 6% offshore, 2-3% for onsite employees

Infy net up 24.3%, disappoints Street

Software services giant Infosys Technologies on Friday reported net profit of Rs 2,369 crore for the quarter ended September 30, 2012, which is 24.3 per cent more than Rs 1,906 crore earned in the same period last year.

However, operating margins of the Bangalore-based bellwether during the second quarter of fiscal 2013 were weaker than expected, falling 160 basis points Q-o-Q.

Operating profit of the company witnessed a slide of 3.6 per cent over the previous quarter ended June 30, 2012. Infosys Chief Financial Officer V Balakrishnan attributed the lower operating margins to the increased cost of sub-contracting during the September quarter.

The outlook for fiscal 2013 -- which did not factor in the revenues of Swiss consulting company Lodestone, acquired by Infosys last month -- was equally disappointing to investors.

The market’s crash of almost 130 points on Friday was in some measure contributed by the Infosys share price falling by Rs 135.80 (or 5.36 per cent) to Rs 2,395.65 at the close of trading hours on the Bombay Stock Exchange. On the National Stock Exchange, the Infosys stock fell as much as 7.23 per cent in early morning trade and closed down 5.44 per cent to Rs 2,395.35, with trading volumes crossing a record 7 million shares on Friday.

“Global economic uncertainties continue to face the industry,” Infosys CEO and Managing Director S D Shibulal said at the company headquarters in Bangalore’s Electronics City, adding, “We have increased employee wages, used some of our cash in a transformational acquisition of a consulting business and enhanced our investment in R&D and solutions. These initiatives will position us well in the industry and provide a strong platform for future growth.”

Infosys maintained their revenue guidance at 5 per cent or $7.343 billion for the fiscal ending March 31, 2013 and said that Lodestone acquisition was not factored in this as the deal was not yet closed.

Revenues of the company during the second quarter ended September 30 rose 21.7 per cent to Rs 9,858 crore from Rs 8,099 crore  a year earlier, with global economic uncertainties weighing in.

Utilisation rate at the company (excluding trainees) fell 400 bps when compared to the same quarter last year.

Balakrishnan said that the company’s operating cash flows continue to be strong while its cash and cash equivalents have crossed $4 billion. “We are focused on high quality growth despite global currency and economic volatility,” he said. Infosys announced a wage hike of 6 per cent to offshore employees effective October 1, 2012 this year and an average of 2-3 per cent to onsite employees from January next year. Analyst at Angel Broking Ankita Somani said that the wage hikes could negatively impact the operating margins (already under pressure over the past two quarters) of the company in the next quarter.

Partha Iyengar, Head of Research – Gartner, India, said on Friday that Infosys has been continuing its relatively weak and underperforming trend and year-end outlook, with the view that the market continues to be weak. “It is likely that the trend of performance gaps widening between various Indian service providers will continue this quarter as well and could be a trend for quite a few quarters to come,” Iyengar said.

Infosys added 39 clients in Q2, though its client matrix has seen significant changes with regard to marquee clients who bring in revenues of $300 million and above.

Balakrishnan to step down; move to BPO, India Business Unit

Bangalore, DHNS: In a major development, Infosys Member of the Board and Chief Financial Officer V Balakrishnan announced that he will step down from his current role on October 31 this year. He will then be responsible for three key businesses -- Infosys BPO, Finacle and the India Business Unit. Rajiv Bansal, currently Vice-President of Finance, will take over as CFO from November 1, 2012.

The company said on Friday that growth has been widespread and led by its larger clients. Commenting on the uncertain global environment, Shibulal said that the US still continues to be challenging, while the European markets are equally in turmoil which has led to decisions on Information Technology (IT) spends being affected.

"I'm just stepping down from the role. We have to give space for youngsters to come up and lead us and we have found a good leader and thought that this is the right time for it.

This (stepping down) has been done successfully in our company several times in the past,” Balakrishnan told

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