Infosys Q4 net profit up 25 percent, beats forecasts

By Soham Chatterjee

BANGALORE (Reuters) - Infosys Ltd, India's second largest software services exporter, forecast an increase in IT spending by its U.S. and European clients to boost sales between 7 and 9 percent this fiscal year, in line with expectations.

Most analysts polled by Reuters had expected Infosys to set a sales revenue growth target of below 10 percent for the fiscal year that began on April 1. Last fiscal year, revenue grew 11.5 percent.

Infosys made the projection as it posted on Tuesday a higher-than expected 25 percent increase in its net profit for the fiscal fourth quarter ended March 31 to 29.92 billion rupees ($496.72 million).

Shares in Infosys rose as much as 4.7 percent after the earnings, while the Nifty was down.

Infosys, which has been losing market share to more aggressive local rivals for about couple of years, brought back its founder N.R. Narayana Murthy from retirement in June last year to revive the company's fortunes.

Murthy has vowed to take tough decisions to boost growth over the next three years but Infosys has seen an exodus of senior executives and staff since Murthy's return, triggering concerns about its ability to compete.

The company said staff attrition rate in the March quarter rose to 18.7 percent from 16.3 percent a year ago. Chief Executive S.D. Shibulal, who is set to retire early next year, said the attrition rate made the company uncomfortable.

"We are making all efforts to make attrition come down through compensation hikes, promotions, progressions, training programs, and a lot of communication, and multiple levels of communication has happened during the year," he told a briefing after the results were announced.

Retaining staff is a challenge for all Indian IT services firms, which rely on armies of young, mainly low-paid workers to remain competitive in an $100 billion industry that gets about three quarters of its revenue from the United States and Europe.

Some of the senior executives, seen as CEO contenders, left Infosys after Murthy brought in his son Harvard-educated son Rohan as executive assistant. Others left due to the restructuring.

Infosys said it added 50 new clients in the March quarter, including Chinese-owned Swedish automaker Volvo Car Corp and Swedish insurance provider Länsförsäkringar AB, taking its total tally to 890. At the end of the previous quarter, Infosys had a total of 888 clients.

(Additional reporting by Nivedita Bhattacharjee in MUMBAI; Editing by Miral Fahmy)