Flat sequential growth, subdued guidance disappoint markets.
Infosys Technologies, India’s second-largest information technology services provider, on Friday posted a 13.6 per cent rise in its fourth-quarter net profit at Rs 1,818 crore, compared with Rs 1,600 crore a year ago. But on a sequential basis (quarter-on-quarter), it was up a marginal 2.1 per cent, due to the appreciating rupee and lower employee utilisation.
Revenue for the three months to March grew 22 per cent to Rs 7,250 crore from Rs 5,944 crore a year earlier. On a sequential basis, it jumped two per cent. Operating profit rose 17.5 per cent to Rs 2,102 crore from Rs 1,789 crore in the year-ago quarter.
Net profit in dollars grew 15.2 per cent year-on-year and 1.3 per cent quarter-on-quarter to $402 million. Similarly, revenue jumped 23.6 per cent year-on-year to $1,602 million.
The results, however, disappointed the street. Issues like subdued earnings per share guidance for this financial year, decline in margin and lack of clarity on management changes knocked the company shares down nearly 10 per cent. Infosys shares closed 9.59 per cent down at Rs 2,988.80 on the Bombay Stock Exchange.
Operating margin declined to 29 per cent from 30.2 per cent in the previous quarter due to the appreciating rupee. However, company officials said the demand environment remained robust.
“We expect the demand environment to be normal this year. We have created a structure with strong customer-driven vertical focus and have enhanced our investment to take advantage of the opportunities we see in the market,” said S Gopalakrishnan, chief executive officer and managing director of Infosys. He, however, said the appreciating rupee remained a concern.
Net profit for the full year rose 9.7 per cent to Rs 6,823 crore from a year earlier. Revenue jumped 20.9 per cent to Rs 27,501 crore from Rs 22,742 crore, while operating profit rose 17.25 per cent to Rs 8,102 crore from Rs 6,910 crore.
The company added 39 clients during the quarter and 135 clients in 2010-11. It got four transformational deals and six outsourcing deals during the last quarter.
“Of the total clients, we have added seven Fortune 500 clients, taking the total number to 154 by the end of last financial year. We also have a strong repeat business of 97 per cent,” Gopalakrishnan said. He said the overall demand would remain strong as indicated from clients budget preparation.
Infosys added 43,000 employees during the last financial year against a guidance of 20,000. “The company has sound hiring plans, as we want to cash in on the emerging opportunities in the market space,” he said. In 2011-12, Infosys plans to recruit 45,000 people. Gopalakrishnan said the company would face some margin pressure due to lower utilisation rate on the back of strong hiring plans.
Dipen Shah, senior vice-president (private client group research), Kotak Securities, said, “The fourth quarter results of Infosys were below expectations. While delays in client spending have impacted revenues, higher recruitment has impacted margins in the fourth quarter.” He, however, said the guidance of 18 to 20 per cent dollar revenue growth for 2011-12 was encouraging and the management’s guidance on the year’s margins should prove conservative.
Some analysts feel the company’s 2011-12 guidance takes a very conservative stance on demand environment. “Infosys’ fourth-quarter results were below our expectation in a seasonally weak quarter. However, the guidance for 2011-12 is in line with consensus. The guidance indicates very conservative stance on demand,” said Shahi Bhushan, senior research analyst -institutional equities, Prabhudas Lilladher.
