Infosys Q1 Net Up 15.4 %, Maintains Revenue Forecast

12 Jul, 2011

Infosys disappointed investors on Tuesday when it maintained its full-year revenue forecast after narrowly missing expectations with its first-quarter results, sending its shares down nearly 6 per cent.

Infosys maintained its dollar revenue growth forecast at 18-20 per cent for the fiscal year ending March 2012. Analysts expected full-year revenue growth of 20 per cent, according to Thomson Reuters I/B/E/S.

India's No.2 software services exporter posted a 15.4 percent rise in fiscal first quarter profit, but was hurt as wage hikes crimped margins amid intense competition from rivals such as IBM, Accenture and Tata Consultancy Services.

"There is one negative that the full-year dollar revenue guidance has not been increased," said Rohit Anand, an analyst at PINC Research. "The major concern is demand at this point of time. So I think the key number is the full-year outlook."

Infosys shares were down 5.1 percent at 2,772 rupees in Tuesday morning trade.

Graphic on Infosys results, click link.reuters.com/xec62s

Infosys added 26 clients in the quarter, its slowest pace of quarterly customer acquisition in at least four years, highlighting global economic uncertainty and concerns about top management changes at the company.

"The market was definitely expecting the revenue guidance would be improved," said K.K. Mital, head of portfolio management at Globe Capital in New Delhi. He added however, "there is no downside risk as far as the business is concerned" and said investors should acquire the stock.

India's $60 billion showpiece IT sector is growing due to improved pricing for its services and increased outsourcing by companies looking to cut costs and boost efficiency.

According to research firm Gartner, the global IT market will expand 7.1 percent this year, up from its previous projection of 5.6 percent growth, which bodes well for top Indian exporters like Infosys.

Founded in 1981 by seven engineers with $250 borrowed from their spouses, Infosys is undergoing a management reshuffle.

In April, Infosys announced the retirement of its billionaire chairman, N.R. Narayana Murthy, who will step down in August, and said current chief executive, S. Gopalakrishnan, will become co-chairman.

The board also said S.D. Shibulal, a founder of the company and currently chief operating officer, will become the new chief executive.

"Infosys has been losing the habit of outperforming on expectations," said Tejas Doshi at Sushil Finance in Mumbai. The "last two quarters, there were expectations of outperformance but they were not able to deliver. What you can conclude is that things are just as they were in the second half of last year. There is no major improvement."

Bangalore-based Infosys, also listed on the Nasdaq, said consolidated net profit rose to 17.22 billion rupees ($387 million), from 14.88 billion rupees a year earlier.

Revenue rose about 21 percent to 74.85 billion rupees, as the firm added 26 clients in the June quarter.

A Reuters poll of brokerages had forecast a profit of 17.29 billion rupees on revenue of 75.2 billion rupees for the company, which counts Goldman Sachs, BT Group and BP among its main clients.

Shares in Infosys, valued at more than $38 billion, have fallen 15.2 percent this year, compared with an 11.7 percent drop in the sector index and an 8.5 percent fall in the Mumbai index.

(Reporting by Sayantani Ghosh and Tenzin Dekeva; Writing by Sumeet Chatterjee; Editing by Jui Chakravorty and Matt Driskill)