The December quarter numbers, which had re-ignited hopes of a turnaround for Infosys, have turned out to be a flash in the pan. On all important parameters such as revenues, volumes, realisations and operating margins, the company has disappointed in the March quarter, with a weak guidance adding to its woes.
Weak financials
During the period, Infosys’ revenues grew just 0.3 per cent sequentially, while net profits rose 1.1 per cent. In dollar terms, the revenues grew a tad faster, though this was still below market expectations.
Profits rose mainly on account of other income - interest on deposits and gains on options and forward contracts. At Rs 674 crore, this number saw a 34 per cent jump sequentially. Tax outflows were lower in the March quarter too.
Volumes were up just 1.8 per cent during the quarter, while realisations fell by 0.6 per cent. These figures offer little visibility about the next few quarters and hint at significant pressure on billing rates as well.
With these numbers, the company seems to have resumed its run of weak performance prior to the December quarter, which led to it lagging peers such as TCS and HCL Technologies.
Some segments perform
The few glimmers of cheer came from verticals — BFSI and Manufacturing — which grew 2.3 per cent and 3.8 per cent, respectively. But energy and utilities as well as telecom segments shrank.
The company’s high-margin package implementation and consulting offering grew marginally, though that did not have any impact on profitability.
North American revenues were flat while sales from Europe, thanks to the acquired Lodestone business, grew at a healthy 5.7 per cent sequentially. Clients in the $90-million category witnessed an increase of two customers to 17. In the $50-80 million bucket, there has been a churn with both additions and exits.
Such client additions may not mean much in terms of earnings visibility. These contrast with the December quarter when Infosys managed to add to large customers in the $100 million plus range.
TCS and HCL Technologies may well continue to be the most favoured companies for investors in the IT pack for the foreseeable future, despite Infosys shedding nearly a fifth of its value in Friday's trade.