Weaker rupee strengthens Infy Q1 net

But stock tanks 7 per cent on market sentiments.

Despite a rough global scenario, a falling rupee against the US dollar helped Infosys Technologies "" India's second largest software services exporter "" report a 20.7 per cent increase in its consolidated (Indian generally accepted accounting principles or GAAP) net profit at Rs 1,302 crore for the first quarter of the current financial year against a net of Rs 1,079 crore for the same quarter of last financial year. Total income grew 28.7 per cent to touch Rs 4,854 crore during the same period.

On a quarter-on-quarter or QoQ basis, net profit grew 4.2 per cent and the top line close to 7 per cent. The results were in line with market expectations, yet the stock fell 7.18 per cent to close at Rs 1,676.45 at the close of trading on the BSE. The overall IT index, too, fell almost 7 per cent, but more due to other factors like higher inflation and lower IIP numbers.

The company also revised its guidance upwards in rupee terms but not in dollar terms since the management remains "cautiously optimistic about the global business environment". For the quarter ending September 30, 2008 (Indian GAAP figures), Infosys expects income to range between Rs 5,229 crore and Rs 5,272 crore. 
 

AGAINST THE ODDS
	June 30, 2008 (Rs cr)		YoY growth (%)	March 31,  2008 (Rs Crore)	Growth  (%)  Q-o-Q
	2007	2008
Revenue	3,773	4,854	28.7	4,542	6.9
PAT	1,079	1,302	20.7	1,249	4.2
EPS	18.82	22.7	20.6	21.78	4.2
Note: PAT for the quarters ended June 30, 2008, and June 30,2007, includes a reversal of tax provisions amounting to Rs 31 crore and Rs 51 crore respectively. Indian GAAP figures

This, according to Anurag Purohit, Research Analyst, Religare Securities, implies a revenue growth of 7.7""8.6 per cent and earnings growth of 13 per cent, which would decrease the pressure of back-ended growth that was a primary concern earlier. EPS is expected to be in the range of Rs 23.52 to Rs 23.95 in Q2.

Infosys also revised its full-year guidance, and now expects its income to range between Rs 21,278 crore and Rs 21,622 crore "" YoY growth of 27.5""29.5 per cent, and EPS to be between Rs 99.34 and Rs 101.06. The conversion rate is taken at Rs 43.04 to the US dollar.

The company recorded a 207 basis point (bps) QoQ fall in its operating (EBITDA) margins. This was due to salary increases in April and higher visa costs. Nonetheless, the rupee depreciation (which gave a 250 bps benefit) did mitigate margin pressure.

Harit Shah, research analyst, IT-Telecom, Angel Broking, notes that in dollar terms, the IT company's sequential growth in revenue stood at just 1.1 per cent and volume growth in IT services was "fairly slothful at a mere 0.4 per cent QoQ while pricing was flat". The management expects pricing to be stable, and offshore exposure to increase this year.

Positive signals include the fact that business from US-based clients "" who account for over 60 per cent of its revenue "" increased 4.3 per cent, and the banking and finance segment grew 4 per cent despite sub-prime crisis.

The firm's Europe business declined, but primarily due to a dip in revenue from its top client (British Telecom), which also explains the decline in telecom revenue. However, the Europe region and telecom sectors "continue to see good traction", according to Kris Gopalakrishnan, CEO and managing drector.

On the hiring front, Infosys added (net) 3,192 employees. Its attrition stood at 13.6 per cent, and employee utilisation at 72 per cent. The company added 49 new clients this quarter.