Infosys Q3 Net At Rs 2,369 Cr; Higher Rev Guidance Cheers Mkt

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Though net profit was down marginally compared to 2,372 crore in the same period last year, revenues (including that of acquired Swiss firm Lodestone) were up 12.1 per cent to 10,424 crore. Revenues stood at 9,298 crore in the year-ago period

"We have done well in this quarter despite an uncertain environment. We continue to gain confidence from a strong pipeline of large deals," Infosys CEO and Managing Director S D Shibulal told reporters here.

This (client) addition has been one of the highest in the last few quarters, he said, adding that the net addition was 25 clients which excludes Lodestone.

"During the quarter, Infosys won eight large deals, amounting to over USD 700 million," Shibulal said. In dollar terms, profit dipped by 5.2 per cent to USD 434 million in the reported quarter, but revenues were up by 5.8 per cent to USD 1,911 million in the quarter under review.

The company has raised its sales forecast for FY'13 to be "at least USD 7.45 billion" (from USD 7.34 billion stated earlier), including USD 104 million in additional revenue from Lodestone. This is about 6.5 per cent growth over last year. Infosys had guided to a dollar revenue growth of 8-10 per cent at the start of the fiscal, but later slashed it to five per cent, citing uncertain economic environment.

"Results were extraordinary and ahead of market expectations. After couple of disappointing quarters, Infosys has delivered a positive result on almost all fronts. Also, the management comments were positive. All these factors are driving the stock up," Ashika Stock Brokers Research Head Paras Bothra said.

Analysts had expected Infosys to further cut its annual sales growth after the company warned last month that US clients were cutting back on projects and there were delays in deal signing.

Shibulal expressed caution on the broader economic environment saying it "remains challenging".

"US is going through various challenges, banking and finance is going through various regulatory challenges, Europe is unstable. Mid quarter, we faced headwinds like extended furloughs and superstorm Sandy... We remain cautiously optimistic about the January-March quarter," Shibulal said.

The USD 100 billion Indian IT-BPO sector gets about 80 per cent of its revenues from the US and and Europe. October-December quarter is traditionally weak as the number of working days are fewer. Tata Consultancy Services (TCS) will announce its third quarter results on January 14, followed by HCL Technologies and Wipro on January 17 and 18. During the quarter, Infosys added 7,499 (gross) and 977 (net) employees, taking the total headcount to 1,55,629.

The company said it gave a wage hike averaging 6 per cent to offshore employees during the quarter and will increase salaries of onsite workers by 2-3 per cent in the January- March quarter.

"We maintained margins despite the wage hike given offshore. The onsite wage hike will impact our margins by about 1 per cent in the fourth quarter," Infosys CFO Rajiv Bansal said.

Infosys will also promote 6,000-9,000 people in the current quarter. Although the company has not yet set the hiring target for FY'14, it has made about 6,000 campus offers.

Liquid assests, including cash and equivalents, available -for-sale financial assets, investments in certificates of deposits and government bonds were Rs 22,501 crore against 22,570 crore as on September 30.

"Infosys results are finally coming closer to reflecting the demand reality, and if this sustains for the next 2 quarters, it could indicate that the worst phase of the company is behind it," Gartner India Country Manager (Research) Partha Iyengar said.

The upping of full year guidance is also a good sign that shows some semblance of a return to confidence for Infosys, which was quickly becoming a "negative outlier" amongst the Indian services majors, he added.