Infosys profit soars 109%, but stock falls

The company’s income from software products and services rose to Rs 351.06 crore (Rs 168.62 crore) while its operating profit was Rs 152.75 crore (Rs 77.93 crore). During the period, the company’s EPS (Rs 5 face value) has grown to Rs 18.34 (basic) against Rs 9.16 and Rs 17.70 (diluted) against Rs 9.09.

The latest quarterly profit included an extraordinary gain of Rs 5.49 crore while there was no comparable gain in the year-ago quarter. Without the effect of the gain, the firm’s first quarter profit was still up 100 per cent year on year. The whopping rise in earnings was largely driven by a sharp jump in revenues from E-commerce related projects. A statement from Infosys said that revenues from E-commerce clients contributed 28.7 per cent of total revenues during the quarter, up from 6.4 per cent in the year-ago quarter.

Following announcement of the results, Infosys chairman and chief executive NR Narayana Murthy said in a live Internet presentation that the firm would continue to post earnings growth in line with the rest of India’s software firms. "However if the market opportunity improves there is no doubt at all that the industry as a whole itself may accelerate."

Industry organisations and analysts have estimated the growth of the country’s software firms at 60 per cent year-on-year, based on a continued global thirst for software services.

Infosys has the biggest weightage of 18.4 per cent in the Bombay Stock Exchange’s benchmark Sensex. Infosys delivered about 17 points of the index’s total gain of 36.77 points or 0.76 per cent to 4,904.2. The Infosys share is up compared to a calendar 2000 low of Rs 5,600 hit on May 29, but still down from its March 8 peak of Rs 13,812.90.

Analysts said they were impressed by the surge in Infosys’s earnings and forecast equally impressive quarters going forward. "The results are very good, slightly better than expectations. The topline growth is more impressive," said an analyst at a foreign brokerage. Some analysts expressed concern over the growing skew in favour of E-commerce related projects at a time when valuations of global E-commerce firms, particularly start-ups, were falling.

Infosys managing director Nandan Nilekani however said during a live television discussion with analysts that only 10.9 per cent of the company’s total revenue during the first quarter was accounted for by Internet start-up firms. "A large part of our E-commerce revenues are coming from traditional Fortune 1000 firms who are E-enabling themselves," Nilekani said, referring to traditional businesses that are setting up online arms. "And even for start-ups we have a good risk management system in place," he said.