Infosys Q3 consolidated net flat at Rs 2,369 cr q-o-q

However, consolidated revenue rose 12% to Rs 10,927 cr, standalone net too flat at Rs 2,265 cr

Bangalore-based Infosys has finally woken up and the market seems to cheer it. The company’s stock was up almost 13% as the markets opened on better than expected third quarter numbers. More importantly the company revised its full year guidance upwards, contrary to the expectation of a cut.

The company’s third quarter net profit was marginally down at Rs 2,369 crore for the quarter ended December 31, 2012 from Rs 2,372 crore in the same quarter last fiscal. On a sequential basis the company’s net profit was flat.

What cheered the street was the company’s guidance which was up 1.45% from that annual guidance provided last quarter. Infosys said that it expects to see its dollar guidance for the fiscal at $7,450 million from the earlier stated $7,343 million. Thus, the company maintained its 5% organic growth guidance that it gave in the second quarter.

The management said that the company expects to achieve a growth rate of 6.4% for the fiscal, including Lodestone. However, it expects the Q4 margins to be a tad softer due to Lodestone. With wage hikes, Infosys expects its Q4 margins to drop by 1.3%.

The revenue for the quarter were Rs 10,424 crore for the quarter ended December 31, 2012, up 12.1% on a year on year basis and QoQ growth was 5.7%. The volume growth for the quarter was 1.5%.

For many it seems that the company is finally turning for good after dismissal quarters. The company’s deal pipeline was also strong. It won eight large outsourcing deals amounting to $731 million of total contract value.  Infosys products and platforms reported announced 14 new wins.  For the quarter the company added a total of 53 clients.

The management maintained that the positive performance is the result of execution of the strategy that Infosys has been working on.

“We have done well in this quarter despite an uncertain environment,” said S. D. Shibulal, CEO and Managing Director. “We continue to gain confidence from a strong pipeline of large deals. However, the broader economic environment remains difficult. Even so, we remain cautiously optimistic about the January-March quarter”, he added. The company also saw its pricing go up by 1.8%.

The other good news was the attrition level in the company. On a year-on-year basis the company’s attrition was down to 15.1% from 15.4%. On a sequential basis it was up marginally from 15% in the quarter ended September 31, 2012.

“We were able to maintain our margins through efficiency improvements despite increased operating expenses. We remain focused on making the right investments for profitable and sustainable growth in the longer term", said Rajiv Bansal, Chief Financial Officer.

The growth was seen across region and verticals. North America grew by 1.6% both sequentially and in constant currency. Europe grew by 16.6% sequentially. India grew by 44.7% sequentially and the rest of the world grew by 7.4 pe cent.

Financial services and insurance which is the largest vertical for the company and also under pressure also did well. FSI grew by 6.4% and 6% on constant currency sequentially. Consulting and systems integration grew by 15% on a sequential basis.  

The impact of Infosys results was evident on other IT stock as well. Tata Consultancy Services (TCS) was up almost 3%, Wipro was up 3% and HCL Technologies was up 1.8%.

Key takeaways:

-- $ revenue guidance for FY13 up to $7450 million from 7,343 million

-- Promotions to 6,000-9,000 employees

-- Wage hikes onsite of 2-3%

-- Strong deal pipeline; 8 large deals won worth $731 mn TCV

-- Margin at 25.69% despite a wage hike