Infosys Marks Q3 Earnings Season with New Vigour, Profit Beats Street Hopes

Published: 10th January 2015 06:07 AM  |   Last Updated: 10th January 2015 06:07 AM   |  A+A-

BENGALURU: Software exporter, Infosys beat market expectations as the Bengaluru-based company posted a 12.7 per cent growth Y-o-Y in net profit at $522 million  (dollar terms).  The company recorded a sequential growth of 2.2 per cent.  The company reported a 13 per cent increase in net profit in rupee terms at Rs.3,250 crore. The third quarter performance saw shares of the company close 5.02 per cent higher at Rs.2,073 on the Bombay Stock Exchange. Volume growth was up 4.2 per cent in the quarter which was their best performance in 3 years and 11 per cent Y-o-Y.

info.JPGThe company reported a revenue growth of 5.6 per cent at $2,218 million. However, the company maintained its conservative guidance of 7-9 per cent growth for the fiscal when compared to IT industry body Nasscom guidance of 13-15 per cent for the sector. Operating margins grew 26.7 per cent (60 bps increase) sequentially. “We are excited by several breakthrough results in Q3. Our renewed strategy is being received well by our clients and we are already seeing its early adoption,” Vishal Sikka, CEO and Managing Director of the company said.

The company has also expanded its innovation fund for start-ups. “One of the things I’m most excited is that our board has agreed to expand our start-up investment fund from $100 million to $500 million to invest in companies around the world, but what I’m particularly excited about is about the dedicated focus towards India,” he said and clarified that this would be apart from the M&A budget.

But recent performances may not be an indication of a turnaround, a cautious Sikka said. “It’s too early to say that,” he said when asked if the current performance could be construed as a turnaround for the company.

If the company was on its way to achieve its earlier ‘bellwether’ status, he said, “No, I don’t think. It is too early to say that and I would not quite jump to that conclusion as much as I would love to.”

North America business grew 2.1 per cent sequentially and 2.3 per cent in constant currency while Europe continued to be under pressure and declined 2.1 per cent sequentially and 1.9 per cent in constant currency terms. The domestic market was up 14.0 per cent sequentially and 16.7 per cent in constant currency.

“Our sequential revenue growth in Q3 was adversely impacted to the extent of 1.8 per cent due to USD appreciation against other major currencies,” Rajiv Bansal, Chief Financial Officer of the company said. Infosys added 59 new clients (gross) during the quarter.

Attrition worries

Despite a good balance sheet,  involuntary attrition at Infosys continues to rise. The first non-co-founder CEO Sikka even gave out 3,000 iPhones to top performers to contain attrition. But the gesture has not been completely effective in keeping people from leaving the company as attrition (LTM) rose to 20.4 per cent in Q3 Fy15 from 20.1 per cent in Q2 FY15. The company even announced a 100% variable bonus payout to its employees for the third quarter. The company saw 8,927 people exit in Q3.

Co Secy Quits

Infosys announced that Parvatheesam Kanchinandham, chief risk and compliance officer and company secretary will be leaving the organisation on January 10, 2015. Kanchinandham, who served at Infosys for over 12 years will reportedly move to Tata Steel. Infosys has appointed David Kennedy, General counsel as the new chief compliance officer and Manikantha AGS as their interim company secretary.

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