Infy results brave price pressure

India’s second largest software exporter Infosys on Friday reported a better-than-expected 13 per cent rise in consolidated net profit at Rs 3,250 crore, for the third quarter of 2014-­15 ended December 31, from Rs 2,875 crore in the corresponding period last year.

Announcing the results for the second time at the helm of affairs after joining the company Infosys Chief Executive Officer and Managing Director Vishal Sikka said that it is too early to say that it is a turnaround. But he did see early signs of the company’s ‘renew and new’ strategy getting traction.

“We are a services company driven by innovation and here we will do wonders. Our ‘renew and new’ strategy is being received well by our clients and our ecosystem and we are already seeing its early adoption,” he said, and added for good measure that “Infosys 3.0 happened a long, long time ago. I don’t even want to go there”.

Following the quarterly results announcement, the Infosys stock bucked the general trend in the market and surged 5.01 per cent at 2,073.60 and the software major maintained its annual revenue guidance for fiscal 2015 at 7-­9 per cent in dollar terms.

Sikka said that utilisation was the highest in 11 years, and volume growth the best in three years.

“Automation and artificial intelligence (AI) will expand the business opportunity in the market. We want to cater to our client services with more offerings so that they will get diversified services,” Sikka said.

Innovation is the way
The CEO admitted to downward pressure on pricing, which he attributed to unique third-quarter factors. He said that the company plans to offset pricing pressure by productivity improvement in existing services and innovation in new services.

Infosys also registered operating margins at 26 per cent, registering a growth of 170 bps (1.7 per cent) on year-on-year basis. The company’s net profit also saw a sequential growth of 5 per cent to Rs 3,096 crore. Infosys’ earnings per share was at Rs 28.44 for the third quarter.

Consolidated revenues for the third quarter increased 5.9 per cent to 13,796 crore compared with the same period last year. Sequentially, revenues grew 3.4 per cent. Total operating expenses rose 13 per cent  at 1,645 crore compared with Rs 1,446 in the same period in the last fiscal.

During the third quarter of the current fiscal, the company and its subsidiaries added 59 clients on a gross basis and added 4,227 employees after accounting for attrition, taking the total to 1,69,639.

North America retained its pole position in revenue generation with a marginal increase at 61.6 per cent and Europe slipped to 24 per cent. But Infosys revenues from India increased to 2.5 per cent in the third quarter, compared with 2.2 per cent in the previous quarter.

Forrester Research VP and Research Director Frederic Giron said, “Infosys posted better-than-expected revenue growth for the quarter.

The net profit was also better than expected with 13 per cent year-on-year growth in USD and in INR. The new Infosys strategy, along with the efforts made by Vishal Sikka in visiting 500-plus clients over the past two quarters, is starting to bear fruit.”
DH News Service