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Mr Nandan Nilekani, CEO, Infosys, and Mr S. Gopalakrishnan, COO, addressing a news conference in Bangalore on Tuesday. — G.R.N. Somashekar

Bangalore , July 12

INFOSYS Technologies disappointed the markets on Tuesday after it announced first quarter earnings that fell short of expectations. This was despite the company raising the outlook for the full financial year.

Infosys reported a net profit of Rs 532.07 crore (Rs 513.48 crore) on revenues of Rs 2,071.59 crore (Rs 1987.82 crore) for the quarter ended June 30 - a growth of 37 per cent and 36.5 per cent respectively.

Sequentially, the growth in core net profit and revenues was 3.62 per cent and 4.24 per cent respectively.

Tracking the Q1 results, the Infosys stock fell 4.12 per cent to close at Rs 2,219.95 on the Bombay Stock Exchange on Tuesday.

For fiscal 2006, Infosys expects its income to be between Rs 8,947 crore and Rs 9,051 crore - a growth of 25-26 per cent. The earnings per share before exceptional items is expected to be between Rs 84.7 and Rs 86 - a growth of 23-25 per cent.

For the September quarter, Infosys expects income between Rs 2,202 crore and Rs 2,215 crore, a year-on-year growth of 26 per cent. EPS for Q2 is expected to be between Rs 19.80 and Rs 20.30

"We have maintained our margins despite absorbing the impact of an annual salary hike, increased visa costs and the appreciating rupee against the euro and the pound," said Mr Nandan Nilekani, CEO and Managing Director.

Q1 operating margins were down at 32 per cent against the last quarter's 33.5 per cent. Net margins stood at 25.17 per cent against the last quarter's 25.83 per cent.

A 13-15 per cent salary hike for offshore employees and a 3-per cent hike for overseas employees, coupled with increased visa costs and an appreciating rupee, had a 1.8-per cent impact on Infosys' net revenues.

"Billing rates have been stable and the new wins are coming in at a higher rate of 2-3 per cent over average rates," said Mr Basab Pradhan, Head of global sales for Infosys.

The company added 36 clients and 3,056 people to its headcount during the quarter. Repeat business accounted for 98.7 per cent of the Q1 revenues.

North America and Europe accounted for 63.6 per cent and 23.9 per cent of total revenues respectively.

The utilisation rates excluding training stood at 77.5 per cent, whereas the onsite, offshore ratio in terms of revenue remained stable at 48 per cent and 52 per cent over the last quarter.

The fears expressed by Infosys over its clients' compliance issues seemed to have waned. "The compliance issues are behind us and there was no impact on revenues," Mr Nilekani said. However, the recent London blasts may affect business travel, Mr Nilekani said, adding that the company has factored in the potential impact in the guidance.

Infosys, Mr Nilekani said, was in the race for a large deal from an Anglo-Dutch entity.

Mr Steve Pratt, CEO, Infosys Consulting, said his division, which is still in an investment phase, grew 120 per cent in Q1 over Q4 last year.

Infosys Consulting signed up 25 clients in its first year.

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