K Raghu and Pankaj Mishra
Bangalore: Infosys Technologies Ltd, India’s second-largest software services company, said profit rose 70% to Rs1,144 crore in the quarter ending March, aided by the reversal of Rs125 crore in taxes and more business at higher billing rates.
The gains helped offset some of the quarterly rise in the rupee against the dollar, the currency in which Infosys bills most of its clients. Sales rose to Rs3,772 crore in the three months, an annual growth of 43.8%. For the year ended March, Infosys’ revenue grew 45.9% to Rs13,893 crore and its profit, 56.6% to Rs3,850 crore.
Indian software vendors are witnessing robust demand for their services in the US and Europe as global corporations such as General Electric, ABN Amro and Best Buy increasingly outsource technology maintenance and software development work to India.
Analysts were concerned that a rising rupee and a rise in salaries for technology workers would hurt the performance of firms such as Infosys. The company has increased average salaries for its employees in India by 12-15%, while it increased wages for workers at client offices by between 5% and 6%, nearly double the 3% annual pay hike given to employees of tech companies in the US. Software employees in India typically get paid about a fifth of their US counterparts.
Infosys forecast lower growth numbers in the quarters ahead. It said it expects revenues between Rs3,896 crore and Rs3,913 crore for the quarter to June, a 29.2% to 29.8% growth over the same months in 2006. For the year to March 2008, it has forecast a 22.6% to 24.6% revenue growth, and said it would end 2007-08 with revenues between Rs17,038 crore and Rs17,308 crore, or over $4 billion.
The Bangalore-headquartered company said it will add 24,500 workers to its 72,241-strong staff in 2007-08; it added over 19,520 employees in the last financial year.
Infosys’ operating margin—measured by earnings before interest, tax, depreciation and amortization as a percentage of revenues—remained flat in the January-March months at 43.7%. “Demand environment continues to be strong. There is more work coming to India,” said Harmendra Gandhi, technology analyst with Brics Securities in Mumbai.
The rupee has appreciated by 1.7% against the dollar in the three months ending March, impacting margins by 3%, but in Infosys’ case this has been offset by improved utilisation of staff and higher income from treasury operations. Infosys has cash reserves of Rs6,073 crore or $1.4 billion.
“New customers are coming (in) at 5-6% higher (billing) rates, while renewals by existing customers are growing at 2-3%,” said S. Gopalakrishnan, president and joint managing director of Infosys, who will take over as chief executive in June from Nandan Nilekani. “We have seen 15.5% sequential growth in our top 10 clients,” Gopalakrishnan said.
S.D. Shibulal, head of world-wide sales and delivery has been elevated as chief operating officer of the company that has over 500 customers, including one from which it earns over $200 million. Its top client, which Infosys declined to name, contributed 8.5% of its revenue in 2006-07.
Infosys will set up a 300-seat development centre in Mexico, to be operational by September, for its clients in the US.
The Infosys stock closed with a gain of Rs43.95 or 2.15% at Rs2,087.60 on the Bombay Stock Exchange; the benchmark BSE Sensex closed up 2.06%.