Infosys Q4 net soars 66 per cent

One of the most keenly awaited results of the software sector may have come out positive but the market expectations are far from met. Infos...

One of the most keenly awaited results of the software sector may have come out positive but the market expectations are far from met. Infosys Technologies Ltd, the bellweather of the Indian IT sector on Thursday posted a 65.87 per cent rise in net profit for the fourth quarter ended March 2005.

However, there’re dark clouds in the infotech horizon. Infosys cautioned investors saying expected revenue in the first quarter of 2005-06 to be nearly flat with the fourth quarter of 2004-05 as customers were busy complying with new US rules tightening financial controls.

‘‘The first quarter growth will be flat. But we will do better in the subsequent quarters and hence we have given a 28 per cent to 30 per cent growth in dollar terms,’’ Infosys MD and CEO Nandan Nilekani said. Infosys will become a $2 billion company this fiscal.

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Thanks to outsourcing by US companies and the sale of a stake in a subsidiary, the net profit rose to Rs 559.09 crore for the quarter ended March 2005 compared with Rs 337.05 crore for the same quarter last year. Excluding an exceptional gain for the sale of a stake in Yantra Corp, the fourth-quarter figures were weaker than expected. The company has not factored in the proposed Fringe Benefit Tax (FBT).

Analsyts tracking the company said the results and the guidance are below market expectations. The result: Tech stocks may take a beating as investors become more careful about expectations.

Nasdaq-listed Infosys said there was a pause due to restructuring operations among some clients and some clients complying with the Sarbanes Oxley Act, a US law to enforce tougher accounting regulations after collapse of big corporations in America in the early 2000’s. ‘‘We see a temporary slowdown because of pre-occupation with compliance,’’ COO S. Gopalakrishnan said. ‘‘We saw that in the fourth quarter. Some of that will be there in Q1 also.’’

‘‘Since the markets are closed on Thursday, there is no immediate effect, but I expect the market to open weaker on Friday morning,’’ said a broker.

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Bangalore-based Infosys’s total income increased 47.30 per cent to Rs 1,932.7 crore for the quarter ended March 2005 from Rs 1,312.08 crore in fourth quarter last fiscal. The board of directors has recommended a final dividend of Rs 6.50 per share (130 per cent on par value of Rs 5 per share).

‘‘Infosys has not factored in the effect of the Fringe Benefit Tax in its result. If that is factored in, earning per share will fall further,’’ said Arun Kejriwal of Angel Broking.

The company has posted 53.15 per cent increase in net profit of Rs 1,904.38 crore for the full year ended March 2005 compared with Rs 1,243.47 crore for the year ended March 2004. Total income has increased to Rs 6,987.16 crore for the year ended March 31, 2005 from Rs 4,888.28 crore in the previous year.

THE ROAD AHEAD

	• Set to become $ 2 bn company (Rs 9,000 cr) firm in 2006 • First quarter growth will be flat as clients tackling US norms • Will add 12,600 engineers in the current year • Fringe benefit tax may bring down earning per share
	FOURTH QUARTER
		Q405	Q404	% Ch
	Net profit	559.09	337.05	65.87
	Income	1932.3	1312	47.3
	FULL YEAR
		2005	2004	% Ch
	Net profit	1904.38	1243.47	53.15
	Income	6987.16	4888.28	42.93

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