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Infosys revises revenue guidance; Q2 profit misses expectations

11 October, 2013

India’s second-largest software services exporter Infosys saw its share price gallop almost 5 per cent on Friday after it raised the lower end of the revenue growth forecast for the current year, even as the firm missed analysts’ earnings expectations for the second quarter ended September 30.

The IT services firm said it now expects a revenue growth of 9-10 per cent against the previous forecast of 6-10 per cent for the year ending March 31, 2014. This is still lower than wider industry growth forecast as per independent analysts.

Meanwhile, Infosys reported a 1.6 per cent growth in its net profit which rose to Rs 2,407 crore missing street expectations, over the year-ago period. This was despite a strong revenue growth of 31.5 per cent to Rs 12,965 crore during the same period.

However, this was partly due to the depreciation of the value of Indian currency against the US dollar. In US dollar terms the firm saw revenues rise 15 per cent to $2 billion while net profit decline 11.1 per cent to $383 million.

“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 of Infosys.

“The global currency market remains volatile with the Indian rupee depreciating by 11 per cent during the quarter. We have an active hedging programme to minimise its impact on our margins. We will continue our focus on optimising costs and enhancing the efficiency of our operations,” said Rajiv Bansal, chief financial officer.

While its operating expenses rose by over 50 per cent, this was partly due to a provision related 

to visa use in the US, its top market contributing close to two-thirds of its revenues. The company is facing scrutiny in the US over usage of temporary employment visas.

EPS for the three months ended September 30, 2013 is Rs 45.96 per share, excluding the provision of Rs 219 crore for visa-related matters. EPS, including provision for visa, was Rs 42.12 per share against Rs 41.46 in the year-ago period.

These numbers represent the first full quarter earnings after co-founder Narayana Murthy returned to chair the board of the company to add spark to the firm which has been underperforming in the fast few years.

Highlights

Revenue from Europe has moved from 21.9 per cent of total in Q2 FY13 to 24 per cent which is in line with its strategy to bring geographic diversification as still over half of its business comes from the US. Revenue generation from India also rose from 1.6 per cent of the total to 2.4 per cent.

Revenue by service offering has seen a shift away from its mainstay of business IT services which contributed 61.4 per cent of business last quarter (against 64.5 per cent in Q2 FY13) towards consulting, package implementation and others which saw its share rise from 30 per cent to 33 per cent in the same period.

Its revenue from onsite work now comprises 52.5 per cent of total against 50.7 per cent in the year ago period.

The firm added 2,964 employees last quarter which could indicate a revival in its hiring against net addition of just 6,694 employees for the full year ended March 3013. It may be partly due to higher attrition which has risen from 15 per cent last year to 17.3 per cent. It had 160,227 employees as of September 30, 2013.

Its employee utilisation rate has also risen from 69.6 per cent to 73.7 per cent in the period. Excluding trainees, this has risen from 73.3 per cent to 77.8 per cent.

Its cash and cash equivalents declined to $3.6 billion at the end of September 30, 2013 against $4 billion as of March 31, 2013.

(Edited by Joby Puthuparampil Johnson)


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Infosys revises revenue guidance; Q2 profit misses expectations

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