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Infosys Q2 net up 7%, $ revenue rises 3.1%, okays 1:1 bonus

The News International Team

Software services exporter  Infosys surpassed street expectations on Friday with the second quarter (July-September) net profit rising 7.3 percent sequentially (up 28.6 percent on yearly basis) to Rs 3,096 crore (on consolidated basis) on strong revenue and operational growth. Profit in previous quarter was at Rs 2,886 crore and CNBC-TV18 poll expected it at Rs 2,985 crore.

“On several fronts, efforts to bring in operational efficiencies yielded encouraging results during the quarter,” said UB Pravin Rao, chief operating officer. Profit in dollar terms was up 6 percent quarter-on-quarter (up 33.4 percent Y-o-Y) to USD 511 million.

Revenue during the quarter grew by 4.5 percent quarter-on-quarter (up 2.9 percent Y-o-Y) to Rs 13,342 crore and dollar revenue climbed 3.1 percent sequentially (up 6.5 percent on yearly basis) to USD 2,201 million in the quarter gone by (in constant currency revenue growth was 3.9 percent Q-o-Q and 6.3 percent Y-o-Y) driven by volume growth.

Volumes increased 3 percent Q-o-Q (2.9 percent in Q1) as offshore volumes increased 3.8 percent Q-o-Q (3.2 percent in Q1) while onsite volumes were up 1.1 percent in September quarter as against 2.2 percent in June quarter. Realisations increased 0.6 percent in constant-currency terms as onsite realisations were up 2.6 percent on sequential basis.

According to CNBC-TV18 poll estimates, rupee revenue had expected at Rs 13,307 crore and dollar revenue at USD 2,195 million.

Infosys has maintained its full year (FY15) dollar revenue guidance at 7-9 percent, which was largely on expected lines.

New CEO Dr Vishal Sikka sees digital transformation driving growth of the company going forward. “Digital transformation is reshaping the business of every one of our clients. We see this as a great opportunity to help them renew the core of their business as well as to expand into new frontiers and are seeing early positive results,” he said.

“Our strategy is to apply the same principles to our own business in order to capture this opportunity and accelerate our growth, within our culture of lifelong learning and purposeful work,” he added.

On the operational front, consolidated earnings before interest and tax increased by 8.5 percent sequentially to Rs 3,483 crore and margin expanded by 96 basis points to 26.1 percent in the quarter ended September 2014 (supported by rupee depreciation and improvement in utilisation) while estimates were at Rs 3,407 crore and 25.6 percent, respectively.

“We have been able to improve our margins during the quarter and feel confident of sustaining these within a narrow band,” said Rajiv Bansal, chief financial officer.

Sikka, who officially joined Infosys on June 12, expects operating margins to be around 25 percent in FY15.

During July-September quarter, utilisation rate excluding trainees was 82.3 percent (at all-time high) compared to 80.1 percent on sequential basis and utilisation rate including trainees was 75.2 percent versus 74.8 percent Q-o-Q.

Infosys and its subsidiaries added 49 clients (gross) during the quarter.

Among the major deals during the quarter, Infosys signed a multi-year agreement with Daimler AG covering management of infrastructure services and data centers. It also received a contract for consolidated IT and BPO operations for a major fashion retailer in the US as part of a five-year oracle retail support agreement and another contract from one of UK’s leading supermarket chains.

Revenue from North America territory grew 3.1 percent sequentially and 3.2 percent in constant currency and Europe revenue growth stood at 4.2 percent (Q-o-Q) and 6.5 percent in constant currency.

Rest of world growth was 2.8 percent Q-o-Q and 4.2 percent in constant currency. However, India revenue declined by 5.1 percent on quarter-on-quarter basis and 4 percent in constant currency.

Major positive factor was the growth in manufacturing sector that reported 3.6 percent sequential growth (up 2.6 percent in Q1FY15) and 4.5 percent in constant currency (2.5 percent in Q1). Financial services and insurance segment grew by 1.2 percent Q-o-Q and 2 percent in constant currency (up 1.8 percent and 1 percent in CC in Q1FY15).

Retail, CPG & logistics division growth was 1.5 percent Q-o-Q and 2 percent in constant currency (up 2.1 percent and 2 percent CC in Q1FY15) while energy, utilities, and communications and services grew by 7.8 percent sequentially and 8.8 percent in constant currency.

However, the only worrisome factor during the quarter was its rising attrition rate, which jumped to 20.1 percent compared to 19.5 percent in June quarter but net addition of 4,127 employees in Q2 versus 879 in previous quarter was a positive indicator. IT exporter and its subsidiaries have 165,411 employees as on September 30, 2014.

As of September 2014, liquid assets (including cash and cash equivalents, available-for-sale financial assets, certificates of deposits and government bonds) were worth USD 5,444 million compared to USD 4,943 million at the end of previous quarter.

In order to increase the liquidity of shares and to expand the retail shareholder base, IT exporter recommended a bonus issue of one equity share for every equity share held.

The same bonus issue is also applicable to ADR shareholders, who will get one American Depositary Share (ADS) for every ADS held as on a record date to be determined.

The company also declared an interim dividend of Rs 30 per share (equivalent to interim dividend of USD 0.49 per ADS at the exchange rate of Rs 61). The record date for payment of dividend is October 17, 2014.

At 09:58 hours IST, the stock was quoting at Rs 3,845.20, up Rs 199.65, or 5.48 percent on the BSE.

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