Infosys: Inside the Q1 numbers

India's bellwether Infosys Technologies Ltd beat expectations with a 21 per cent rise in quarterly profit, thanks to a weaker rupee. The country's second-biggest software firm began the earnings season for the country's IT sector by recording a net profit of Rs 13.02 billion ($303 million) in the first quarter ended June, from Rs 10.79 billion reported a year earlier.

Nasdaq-listed Infosys said that the demand for its consulting services amongst market-leading firms continued to be strong. Here's looking inside the key Q1 numbers of Infosys.

Economic environment tough
Terming the economic environment "challenging," Infosys said that there is still bad news coming out of banking and retail. IT spending seems to be "flat or marginally decreasing." The US market is currently under tremendous pressure due to subprime impact. At the same time, European clients are spending less on fears of an economic slowdown

Raises guidance

The company raised its full-year guidance on hopes of a revival in outsourcing demand. The no. 2 IT services company forecasts that revenue for the year to March 2009 would grow 27.5-29.5 per cent, in rupee terms, up from April's forecast of 19.2-21.1 per cent. The company expects margins in the year to March 2009 to remain stable in a narrow band.

Sees growth

The company spokes person said that although the global economic environment continues to remain unstable and could impact IT spending in the short term, Infosys sees several opportunities for growth as customers focus on improving efficiency. Infosys said it generated 63 per cent of revenue from North America last quarter, with banking, financial and insurance companies accounting for 35 per cent of sales.

Wages, visa bite!

While a weaker Indian rupee boosted the bottomline, company's margins were impacted by wage increases and visa costs. Indian software companies tend to get much of their income from the US, billing in dollars. A weaker rupee helps them to price their services more competitively and convert their dollar income into greater local currency.
The currency market is expected to remain volatile in the short term, according to the company.

Client additions

The deal flow seems to be going strong with the company adding 49 clients during the quarter, one of the highest in a long time. The company also said that pricing remained stable in the June quarter. The company is reportedly pursuing about a dozen integration deals and believes that even if IT spends remain flat or come off somewhat, there will be enough offshoring work for Indian vendors. The company added 3,192 new employees over the quarter.

Sensex not flattered

Infosys `better than expected' results, however, didn't seem to please Sensex with IT goods stocks ending among the worst performers. Biggest Sensex losers comprised Tata Consultancy Services (-7.93%) and Infosys Technologies (-7.82%). On its part, Infosys increased the EPS outlook for the fiscal. The company expects to grow EPS by around 23 per cent as against an earlier outlook of around 17 per cent.

Courtesy: Indiatimes News Network & Agencies