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Infosys posts 21.6% Y-on-Y profit growth in Q1

The IT major retains revenue guidance at 7-9 % for FY15; Attrition peaks to over 19% during the June quarter

Debojyoti Ghosh
Published: Jul 11, 2014 11:12:33 AM IST
Updated: Jul 11, 2014 11:47:24 AM IST

India’s second-largest IT-services exporter Infosys on Friday posted a 3.5 percent sequential decline in net profit to Rs 2,886 crore during the April-June stretch, while year-on-year it was up 21.6 percent backed by surge in outsourcing demand. In dollar terms sequential profit dropped marginally by 1 percent to $482 million.

The Bangalore-based company recorded a sequential dollar revenue growth of 2 percent at $2,133 million during the June quarter compared to $2,092 million for the quarter ended March. Year-on-year dollar revenue was up 7.1 percent.

“Dollar revenues growth was led by healthy volume growth of 2.9 percent. Infosys’ EBIT margin declined by just about 35 basis points (bps) q-o-q to 25.1 percent as compared to our expectation of about 210 bps sequential decline. This is commendable given the fact that company was facing margin headwinds of wage hike, visa costs increase and rupee appreciation,” said Ankita Somani, IT analyst, MSFL Research. “On a broader level, the company has been able to mitigate that by utilisation improvement as well as decline in employee expenses,” she added.

Analysts were expecting Infosys to record a dollar revenue growth of 1.8-2 percent during the first quarter of the current fiscal, while profitability was expected to decline hit by annual wage hikes and visa expenses during the April-June period.

However, the IT major maintained its dollar revenue growth of 7-9 percent for FY15, lagging the 13-15 percent growth expected for the industry by Nasscom.

“We expect that the company will be easily able to clock in 8.5 percent dollar revenue growth in FY15. The management opined that the global economic environment has improved and looks exciting for IT services industry,” said Somani.

Earlier considered as an indicator of Indian IT industry's overall performance, Infosys has failed to record market leading growth over the last few fiscals. Even for FY14, Infosys managed to touch the lower-end of its guidance at 11.5 percent, still below the industry growth rate of 13 percent in FY14.

In rupee terms, Infosys reported net profit of Rs 2,886 crore for the June quarter compared to Rs 2,992 crore during the January-March period. Revenue was slightly down 0.8 percent sequentially at Rs 12,770 crore compared to Rs 12,875 crore in the previous quarter.

“We continue to enjoy the confidence of our clients. As I transition the CEO mantle to Vishal, I am confident that he will leverage this strong foundation to take Infosys to greater heights,” said S D Shibulal, CEO and managing director, Infosys. Vishal Sikka will take over from 1st August.

Infosys and its subsidiaries added 61 clients during the April-June quarter. Net addition of employees during the quarter stood at 879. The company had 161,284 employees as on June 30.

“We improved operational performance as a result of our cost optimisation initiatives and a focus on increasing productivity and utilisation. This partially offset the impact of compensation increases for our employees this quarter.” said Rajiv Bansal, CFO, Infosys, adding that “It will help us invest in areas that will accelerate growth.”

The company’s attrition rate during the April-June period stood at 19.5 percent compared to 18.7 percent in the March quarter.

“We believe that the impact of current high level exits could be felt in the near term but with a new CEO in place and the company being system driven with a decent management bandwidth, the impact will not be long lasting,” noted Somani of  MSFL Research.

Shares of Infosys rose 1.41 percent at Rs 3339.25 in morning trade on the Bombay Stock Exchange on Friday, while the sensitive index, Sensex, was trading flat, up 0.13 percent.

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