Infosys Consolidated Net Profit Falls 3.6%

MUMBAI -- Infosys Technologies Ltd. Tuesday reported a smaller-than-expected drop in third-quarter net profit, and raised its outlook for the full year in a sign of improving times for India's technology companies.
Infosys--India's second-largest software exporter by sales--said its October-December consolidated net profit fell 3.6% to 15.82 billion rupees ($350 million), or 27.75 rupees a share, from 16.41 billion rupees a year earlier.
Consolidated revenue dropped 0.8% to 57.41 billion rupees from 57.86 billion rupees a year earlier.
The market had expected worse.
A Dow Jones Newswires poll of 13 analysts had predicted a net profit of 14.83 billion rupees on revenue of 55.80 billion rupees.
Bangalore-based Infosys--which is listed on the Nasdaq and on the Bombay and National stock exchanges in India--is the first major local technology company to report results every quarter.
Its performance is considered to be an indication of how its rivals will do. Its results now raise expectations that Tata Consultancy Services Ltd., Wipro Ltd. and HCL Technologies Ltd. will also report numbers which reflect improving demand.
"The growth this quarter has been led by the top 10 clients," Infosys Chief Operating Officer S. Shibulal said. Revenue from its top 10 clients--who contribute 27.5% to revenue--grew 12.2% from the second quarter.
Total business volumes went up 6.1% sequentially, he added.
Indian technology companies are slowly recovering from the impact of the global economic slowdown, which had led their customers to scrap or delay projects and seek lower rates for products and services.
"The global economic recovery seems to be led by the U.S. and the financial services" sector, Chief Executive and Managing Director S. Gopalakrishnan said in a statement. "Even though IT budgets are expected to be flat in 2010, offshore outsourcing is expected to benefit from this recovery."
Brokerage firm CLSA said the results were strong. "With a lot of business billed hourly or daily, more holidays in the December quarter mean a weak seasonal pattern. Not so this time," it said in a note to clients.
CLSA, which targets the stock to rise to 3,100 rupees, said the results looked as if the outsourcing industry is returning to the momentum it witnessed a few years earlier.
"It feels like 2004 all over again as Infosys results point to a major up-cycle in outsourcing, driving earnings up to levels not imagined till recently."
Infosys raised its earnings outlook to 106.85 rupees-107.06 rupees a share for the current fiscal year through March from its previous view of 99.60 rupees-100 rupees.
The new estimate is 2.2%-2.4% above the company's earnings last year.
Its new revenue forecast for the fiscal year is 224.73 billion rupees-225.19 rupees billion, up from an estimate of 219.61 billion rupees-220.55 billion rupees given in October.
In dollar terms, Infosys expects revenue of $4.75 billion-$4.76 billion for the fiscal year, up 1.8%-2.0% from a year earlier. It expects earnings to be $2.26 per American Depositary Share, up 0.4% from the previous year.
Infosys, which gets about 99% of its revenue from outside India, said its forecast is based on the rupee staying at 45.75 to the dollar.
The rupee, which is currently trading at 45.46 to the U.S. dollar, gained 3.7% against the greenback in the just ended quarter.
For the current quarter ending March 31, the company expects earnings of 25.62 rupees-25.83 rupees a share on revenue of 56.75 billion rupees-57.21 billion rupees.
"They (Infosys) have already done around 81 rupees per share in three quarters and with the kind of pick up in volume growth they have shown now, the current FY10 outlook seems a little conservative," said Indrajeet Kelkar of Dolat Capital.
Mr. Kelkar expects the firm's current fiscal-year earnings to be around 110 rupees a share.
The company's operating margin expanded to 35.1% from 34.6% in the quarter ended Sept. 30, helped by higher pricing--which rose 1.1% from the previous quarter--and more people working on active projects, despite a strong rupee, Chief Financial Officer V. Balakrishnan told reporters.
Mr. Balakrishnan said he expects margins to fall 180-200 basis points sequentially in the fourth quarter as the rupee "may gain in the short term" and due to staff costs.
For the current fiscal year, operating margins are likely to be flat or expand by 50 basis points, while billing rates are likely to decline 3.7% from last year, he added.
Infosys had foreign-exchange hedges worth $669 million as of Dec. 31.
Infosys added 32 clients in the just-ended quarter.
The company, which hired a net 4,429 staff during the October-December period against 1,548 in the previous quarter, had 109,882 employees at the end of December.
It expects to hire 6,000 employees in the January-March period, taking the total additions for the fiscal year to 24,000, Mr. Shibulal said. Its target earlier was to add 20,000 people during the year.
Source:http://online.wsj.com