Infosys Tech net may top Rs 1,000 crore

Software major's sales seen at Rs 4,800 cr in 2003-04 financial year

If Infosys Technologies maintains the 30 per cent growth rate in net profit it recorded in the first nine months of this year, it will be the first software company in India to record an annual net profit of over Rs 1,000 crore "" Rs 1,190 crore to be precise.

Infosys will report its results for the year ended March 2004 today.

The company had reported a net profit of Rs 957.93 crore in the year ended March 2003.

Also, if it repeats the 32 per cent growth in sales it achieved in the first nine months this quarter also, it is likely to post sales of Rs 4,800 crore in the year ended March 2004.

For the year ended March 2003, Infosys had posted sales of Rs 3,622 crore.

But trends in the first three quarters suggest the company may report as much as a 200 basis point drop in operating profit margins (OPM).

During the first nine months to December 2003, Infosys had posted a 32.93 per cent OPM, against 35.11 per cent in 2002-03.

The company's salaries-to-sales ratio dropped marginally to 50.56 per cent in the nine months from 51.34 per cent in 2002-03.

The drop in the ratio is due to the new recruitments made in the last two years.

With over 40 per cent of the workforce having less than two years of experience, the average salary at Infosys has come down.

The stock, however, had reacted sharply after the December quarter results.

Although there has been a marginal recovery after the company's proposal to announce a bonus/stock split at today's board meeting, the market value of Infosys shares has declined 16.1 per cent from the peak of Rs 6,129 on January 9, 2004, to Rs 5,139.85 today.

The fall in Infosys' share value was despite an improvement in its profit outlook for the fourth quarter as well as for the full year ending March 2004.

The company's sales outlook for the quarter ended March 2004 was put at Rs 1,269 crore and earning per share (EPS) at Rs 49.50 per share of Rs 5 each.

For the fiscal ending March 31, 2004, income from software development services and products was estimated at Rs 4,721 crore and EPS was expected to be Rs 186.20.

Analysts expect Infosys to provide guidance in earnings per share of around Rs 220 for 2004-05, which may not go down well with the markets.

Infosys had an excellent third quarter where the topline increasing by nine per cent on a sequential basis and 29 per cent on a year-on-year basis. The market expectation is that this trend will continue and the company will grow 7.8 per cent sequentially with revenues of Rs 1,332 crore for the quarter ended March 2004.

The company should be able to maintain operating margins at the same levels as in the previous quarter due to lower salaries and general and administration expenses.

The company should post a net profit of Rs 355 crore for the fourth quarter. Estimates are that the company should end the year with a net profit of Rs 1,261 crore, giving it an EPS of Rs 190.40 which outperforms its revised EPS guidance of Rs 186.