IT bellwether Infosys reported third quarter numbers which were in line with the market's expectations. Infosys grew its revenues in dollar terms by 1.7 per cent compared to the second quarter. The December quarter typically is a weak quarter due to holidays and furloughs. which is why revenue growth has come in below 2 per cent compared to the previous quarter. However, the good news is that the bottom line has soared by 21 per cent sequentially to $463 million, on better control on operating costs.
Overall, the company continues to show signs of recovery at the operational level. The company has added 54 new clients in the quarter and added 15 clients where the deal size is over $100 million. This implies that client confidence is returning. The company has also improved its utilisation from 73.7 per cent in the second quarter (including trainees) to 74.1 per cent. Excluding trainees the company's utilisation level has moved up to 78 per cent in Q3 from 77.8 per cent in Q2. In the year ago period, the company's utilisation stood at 70 per cent including trainees and 73.2 per cent excluding trainees. Commenting on how much more the company can improve margins, BG Srinivas, president of Infosys, says: "While we have worked on the onsite/offshore ratio, there are several other things we are doing to lower costs. We have been working on improving internal efficiencies by adopting a more targeted approach to deliverables. We have also improved automation. if the pricing environment remains stable, we can see some margin expansion but you must remember we have to remain competitive in the market."
Barclays believes that the company can expand margins by another 280 basis points to 27.8 per cent as the company is on a repair path and has beaten market expectations for the third straight quarter. After the volatility of the last three years, it does appear that the company is returning to operational stability, even if internal issues continue to plague the company.
The company's cost cutting measures are yielding the expected gains. This again is in line with what the market was expecting. During the December quarter, Infosys selling and marketing expenses declined by 13.3 per cent compared to the second quarter. Administrative expenses too have declined by 18.4 per cent in dollar terms. Both these have helped improve operating margins. The company has seen operating margins improve by The IT major's operating margins have jumped by 310 basis points sequentially to 25% in Q3.
In rupee terms, Infosys reported a 0.5 per cent sequential growth in revenues to Rs 13,026 crore. Compared to the corresponding quarter last year, Infosys' revenues have grown by 25 per cent. Gross profit in rupee terms has grown by 2.7 per cent sequentially in the third quarter, as operating expenses have declined both in rupee terms as well as dollar terms. Net profit for the quarter ended December 31, 2013 grew 19.4% sequentially to Rs 2,875 crore, while the same was up 21.4% on a year-on-year basis.
