Infosys scripts slow but steady recovery, profit rises 5%

Infosys posted 30.30 billion rupees ($475.85 million) in profit in the June quarter, up from 28.86 billion rupees a year ago.

By: ENS Economic Bureau | Mumbai | Updated: July 22, 2015 1:53 am
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Infosys Ltd, the country’s second largest IT services exporter, has started to script a slow but definitive turnaround story with the company reporting a 5 per cent rise in the net profit at Rs 3,030 crore for the quarter ended June 2015 against Rs 2,886 crore in the same period of last year. The company, led by CEO Vishal Sikka, also posted the highest volume growth in 19 quarters and raised the revenue guidance for FY16.

Revenue for the latest quarter rose by 12.40 per cent to Rs 14,354 crore from
Rs 12,770 crore in the quarter ended June 2014. However, the net profit dipped by 2.1 per cent on a sequential quarter-on-quarter basis, while revenue increased by 7 per cent.

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With the results beating market estimates, Infosys stock zoomed 11.05 per cent to Rs 1,112.65 on the BSE on Tuesday. The IT blue chip’s bullish revenue guidance lifted other IT stocks too.

The rise in revenue surpassed the analysts expectations as Infosys delivered an all-round performance with the management attributing it to the performance of its top accounts, aided by an efficient delivery engine. Analysts termed the results as the company’s best in over three years. Buoyed by these numbers, it has raised its revenue guidance in US dollars terms to 7.2-9.2 per cent as against the earlier projection of 6.2-8.2 per cent. However, the firm has retained its constant currency guidance at 10-12 per cent.

Sikka said, “I believe that this is the result of the initiatives that we have taken. The deep client focus, organisational realignment in delivery, sales and consulting. This quarter also saw deep operational focus as well as widespread adoption of innovation and technologies that has started to bear results now.”

Infosys had struggled during entire FY15 with a growth of 5.7 per cent. “The initiatives we have started has begun to produce results in small and measurable ways. We are still cautiously optimistic. We are still early in our journey towards becoming a next generation services company as I have laid out. However, this quarter gives us something to smile about and good reason to be confident,” Sikka said.

Brokerage house, CLSA in its note said, “an outstanding beginning indicates that new management is investing in the right areas and has been able to get to the pulse of employees and clients. Addressing these underlying drivers will be a key recovery driver for overall prospects of the firm. Infosys has been able to go back to basics under the new CEO by refocusing on stronger differentiation, greater client engagement and realigning the firm to drive the change.” Meanwhile, as per the IFRS (dollar) standards, its revenues were $2.256 billion, a rise of 5.7 per cent from last year. The net profit rose by 1.3 per cent to $476 million on a year-on-year basis.

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