Infosys Q2 Net Rises 9.7%; Revenue Outlook Cut

12 Oct, 2011

Infosys Ltd, India's No.2 software services exporter, reported a 9.7-per cent rise in quarterly profit and cut its full-year revenue outlook by less-than-expected, cheering investors who shrugged off its warning about global economic uncertainty.

Kicking off results for India's nearly $76 billion IT sector, shares in Infosys rose 6 per cent on Wednesday to their highest level in more than two months, outperforming the broader market.

The company, which counts Goldman Sachs, BT Group and BP among its main clients, trimmed its dollar revenue growth forecast to 17.1 per cent to 19.1 per cent for the fiscal year, from 18 per cent to 20 per cent projected earlier.


"The dollar revenue guidance cut is due to cut in discretionary spending by clients. But it was modest compared with what people had expected," said Jagannadham Thunuguntla, research head at SMC Global Securities.

He said analysts had expected Infosys to slash its dollar revenue outlook by 4 to 5 per centage points.

By 0500 GMT, Infosys shares were trading at 2,646 rupees a share, up 5.7 per cent.


Infosys Chief Financial Officer V. Balakrishnan said the reduction in forecast was mainly due to currency volatility.

India's IT sector, which feeds off increased outsourcing by companies looking to cut costs, is expected to face pricing pressure and a decline in new orders as Europe struggles with a debt crisis and the United States sees an economic slowdown.

Infosys and domestic rivals Tata Consultancy Services and Wipro also face stiff competition from global players including IBM and Accenture for large outsourcing deals.


More than half of Bangalore-based Infosys' revenue is generated in the United States. Europe is its second largest market, accounting for 20.5 per cent of its revenue in the second quarter, down from 21.8 per cent a year ago.


"The global macroeconomic environment is still uncertain. It is and should be a concern for the IT industry," S.D. Shibulal, chief executive officer of Infosys, said in a statement.


Nasdaq-listed Infosys said consolidated net profit rose to 19.06 billion rupees ($387 million) for the fiscal second quarter ended Sept. 30, from 17.37 billion rupees reported a year ago, as a weaker rupee boosted results.

Revenue rose 16.6 per cent to 81 billion rupees as the company added 45 clients in the quarter.

A Reuters poll of brokerages had forecast a profit of 18.9 billion rupees on revenue of 81.2 billion rupees for the company.


"The results have been helped partly by the depreciation in the rupee. The main thing to watch out for will be how the US and Europe will move in the coming months," said R.K. Gupta, Managing Director at Taurus Asset Management.

"But Indian IT companies and Infosys in particular have a cost advantage over their global peers. I am not very pessimistic on these companies," he said.

Infosys, worth about $29 billion, has lost more than a quarter of its market value this year, roughly in line with a 25 per cent fall in the sector index, but outperforming a 19 per cent decline in the Mumbai market index.


The company expects its dollar revenue to rise to $7.08 billion to $7.2 billion in the fiscal year ending March 2012.