After a disappointing eight straight quarters, Infosys finally delivered with a better-than-expected net profit of Rs 2,369 crore for the October-December period while raising the full year revenue guidance 3 per cent to Rs 40,746 crore.
Reacting swiftly to the higher guidance for the fiscal on the back of $104 million additional revenue from Lodestone acquisition, Infosys stock closed nearly 17 per cent higher at Rs 2,712, adding Rs 22,524 crore to its market value.
‘Cautiously optimistic’
Infosys management tempered the celebratory mood in the company by stating that it was still “cautiously optimistic” about the fourth quarter. “We have done well in this quarter despite an uncertain environment,” said the company’s CEO and Managing Director, S. D. Shibulal.
“We continue to gain confidence from a strong pipeline of large deals,” he said. CFO Rajiv Bansal, who took over the job last quarter from the long serving V. Balakrishnan, explained that the company was able to put up a strong show because of higher efficiencies even though it was bogged down by increased operating expenses.
While the net profit (Rs 2,369 crore) remained flat sequentially as well as year-on-year, revenues (which included Lodestone acquisition) grew 12.1 per cent year-on-year and 5.7 per cent sequentially to Rs 10,424 crore. Without the Lodestone acquisition, revenues were higher by 9.8 per cent year-on-year and 3.6 per cent sequentially to Rs 10,210 crore.
Pay hike
The company also said it will promote 9,000 employees and offer 2-3 per cent hike in salaries for its onsite employees who constitute about one-fourth of the total strength.
“With the current set of results, there seems to be a case for a re-rating of Infosys and narrowing the gap between TCS and Infosys, but this will depend on how client budgets pan out for the next year and Infosys’ share in the deal renewals area,” Ankita Somani of Angel Broking said.
Shibulal said the company has still another 3 per cent to catch up if it were to close in on its guidance of 5 per cent. He said they were still not sure how the industry itself will pan out next fiscal and would wait till the budgets are finalised by February.
Large deals
He said the company won eight large transformational deals which had a total contract value of $731 million, and these have now started yielding revenues.
“We have worked more closely with the clients this quarter. Some companies said we will shut down projects entirely but we convinced them (not to do so),” he said.
Shibulal said its new strategy of focusing more on software products and platforms paid dividends in the quarter.
CFO Bansal said Europe grew 16 per cent for the company counting in the acquisition of Swiss-based consultancy company, Lodestone. India business too grew aggressively by 44 per cent with most of the revenues being a spillover from the previous quarter. North America revenues were higher by 1.6 per cent.
Infosys was able to maintain margins despite higher operating costs, though the operating margins declined 25.69 per cent compared with 26.3 per cent on a sequential basis because of wage hikes.
The company added a net of 977 employees for the quarter. It has made a campus offer of 6,000 for the next fiscal.