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Infosys Q1 net rises 49 pc at Rs 794 cr

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Highest-ever guidance: revenue and earnings outlook raised for financial year 2006-07

A lot to cheer: Mr Nandan Nilekani, CEO, MD and President, Infosys, and Mr S. Gopalakrishnan, COO, addressing a press conference in Bangalore on Wednesday. - G.R.N. Somashekar

Bangalore , July 12

Infosys Technologies Ltd sprang a surprise and beat street estimates on Wednesday posting a 49.2 per cent growth in net profits for the June quarter. The company also gave its highest-ever guidance by raising the revenue and earnings outlook for the financial year 2006-07.

A volume growth of 8.5 per cent across multiple verticals, aided by improved pricing and a depreciating rupee, helped Infosys report a net profit (before exceptional items) of Rs 794 crore on revenues of Rs 3,015 crore in the first quarter of the financial year, as compared to a net of Rs 532 crore on revenues of Rs 2,071 crore in the corresponding quarter last year.

Sequentially, the company's net profits and revenues grew by 19 per cent and 15 per cent respectively over the previous quarter. This quarter-on-quarter profit growth of 19 per cent is the highest ever clocked by the company in a single quarter since the second quarter of financial year 2001.

Buoyed by its first quarter performance, the company raised its full-year revenue forecast to between Rs 13,350 crore and Rs 13,400 crore; a year-on-year (YoY) growth of 40.2-40.7 per cent as compared to the earlier projected growth of 28.7-30.7 per cent.

Infosys expects earnings per share to be between Rs 124.51 and Rs 125.74, a YoY growth of 38.3-39.6 per cent. For the September quarter, it expects revenues to be between Rs 3,257 crore and Rs 3,280 crore, a YoY growth of 42-43 per cent.

Tracking the first quarter results and earnings outlook, Infosys shares hit an intra-day high of Rs 3,400 on the Bombay Stock Exchange before closing at Rs 3,386.45, up 7.5 per cent over the previous close.

Reasons for growth

Mr Nandan Nilekani, CEO, President and Managing Director, attributed the company's performance to robust growth and a declining rupee. The revised guidance is due to better-than-anticipated growth in the April quarter, a weak rupee and assuming a 34 per cent volume growth in a flat pricing scenario, he said.

Mr V. Balakrishnan, Chief Financial Officer, said, "We benefited from the depreciation of rupee against all major currencies during the quarter." "Our margins have been maintained despite increases in salaries and visa costs," he said.

The first quarter operating margins were lower by 2 per cent at 29.7 per cent. The company effected a 14-15 per cent wage hike for its offshore employees and a 3 per cent hike for its onsite employees; it incurred a visa cost of $11 million.

The impact of wages and visa costs were largely offset by the positive impact of rupee decline and the depreciation in some overseas investments, Mr Balakrishnan said. Infosys had a beneficial impact of Rs 52 crore due to decline in rupee, while its billing rates on a blended basis were up 1.8 per cent during the quarter, he said.

It added 38 new clients during the quarter, of which two had a revenue run-rate of over $100 million on the last twelve month basis. The company added over 8,000 employees during the quarter.

Changes in management

Infosys also announced changes to its top management and said Mr N.R. Narayana Murthy, Chairman and Chief Mentor, would continue as the Non-Executive Chairman and Chief Mentor effective August 21. Similarly, Mr S. Gopalakrishnan, Chief Operating Officer and Deputy Managing Director, would assume the new role of President, COO and Joint Managing Director, effective August 21.

Related Stories:
Infosys revenue tops $2 b; Q4 net rises 20.6 pc
Infosys Q1 net profit up 37 pc — Stock falls 4.12 % as results disappoint market

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