Bangalore/Mumbai: India’s second largest software services firm by revenues, Infosys Technologies Ltd, exceeded analyst expectations when it reported profits expanded by more than 25% to Rs1,231 crore in the quarter ended December, aided by a tax reversal and interest earned from bank deposits.
Year-on-year revenue growth, at 16.9% in rupee terms, was the lowest in some 43 quarters, at Rs4,271 crore.
Exceeding expectations: Infosys chief executive Kris Gopalakrishnan at a press meet to announce the company’s results in Bangalore on Friday.
And, despite better billing on its services and lower selling expenses in the quarter, the weakening influence of the rupee, a currency that has expanded nearly 15% since the beginning of 2007, meant the
slowest expansion of annual operating margins in the third quarter in seven years.
Operating margins, measured as a percentage of earnings before interest, taxes, depreciation and amortization, or Ebitda, as a percentage of sales, grew by 15.49% in rupee terms in the quarter, aided by a 13% decline in sales and marketing expenses. While the company earns more than 90% of its revenues in dollars, euros, pounds and the yen, most of its spending is in rupees.
Annual growth of Ebitda margins for the third quarter was 23% in fiscal 2002, and reached a peak of 49% in the December quarter of 2005.
Infosys, the first large Indian vendor to report quarterly numbers, said though the macro-economic environment was challenging in the US, from where it earns more than 60% of its revenues, the company had not seen customers decreasing or deferring their information technology budgets this year.
“I have not seen any slowdown,” said S. Goplakrishnan, chief executive officer of Infosys. “There is no project cancellation or delays.”
The company maintained its rupee profit forecast for fiscal 2008, despite an appreciating Indian currency versus the dollar, the currency that Infosys bills two of three clients in.
Infosys expects its revenues for quarter to March to be between Rs4,477 crore and Rs4,501 crore, translating into 4.8% to 5.4% quarter-on-quarter growth.
“While Infosys guided decent fourth quarter sequential revenue growth of 5%, the company disappointingly left the fiscal 2008 revenue and earnings per share guidance unchanged,” Manoj Singla, software analyst at JPMorgan’s Mumbai offices wrote in a note to customers.
“Weak volume growth is worrying, especially given concerns of a US slowdown, and would raise fears of sector slowdown,” the note said.
Investors, disappointed by the results, sold Infosys shares, driving them down 1.38% to Rs1,580.10 a share on the Bombay Stock Exchange even as the benchmark Sensex index rose 1.19%. The exchange’s information technology index, a basket of 18 technology stocks, did lose some 1%.