The country’s second-largest IT services exporter, Infosys, on Friday raised its dollar revenue guidance for the current fiscal, projecting a 11.5-12% growth in annual revenue on the back of its third-quarter earnings that beat market estimates. The firms’ net profit for the quarter during October-December grew 6.7% year-on-year in dollar terms with operating margins moving up by 1.5% to 25%.
Infosys’ revised guidance for annual revenue comes in higher than the 9-10% range previously expected, bringing it closer to the software services industry’s growth prediction of 12-14% for FY14. The quarterly performance also came amid a management churn at the company that has seen a series of top-level managerial exits in the past six months. Infosys’ shares gained 2.84% to close at R3,548.90 at the Bombay Stock Exchange on Friday.
In dollar terms, the company’s profits grew 6.7% year-on-year to $463 million, against $434 million. The company’s revenue grew 9.9% year-on-year to $2,100 million during in the quarter. Sequentially, the firm’s profit moved up 20.9% while revenues increased 1.7%.
In rupee terms, Infosys capped the December quarter, traditionally a weak one for IT firms, with a 21.4% increase in consolidated net profit at R2,875 crore, compared with R2,369 crore in the year ago period.
The company’s consolidated revenues grew 25% to R13,026 crore, compared with R10,424 crore in the corresponding period a year ago. Sequentially, net profit grew 19.4% and revenue increased by 0.5%.
JP Morgan said Infosys reported a better-than-expected third-quarter earnings primarily due to margin expansion efforts while revenue performance was in line with estimates.
“The company reports 1.7% quarter-on-quarter revenue growth versus our expectation of 1.5% quarter-on-quarter and meaningful margin expansion. We believe margin expansion/management is the highlight of the quarter,” the brokerage said. “Murthy’s cost optimisation measures are paying dividends. However, there are still a few soft patches in the quarter such as high quarterly annualised attrition, decline in employee hiring and sequential decline in onsite billed volumes.”
Infosys executive chairman NR Narayana Murthy, who came out of retirement in June to steer the company, said cost optimisation initiatives are aimed at getting results in 6-18 months.
“Sales force restructuring will bring value between 9-12 months while delivery effectiveness will take between 12-36 months. We believe we will become the best soon,” Murthy said. “Sales force headcount is being rationalised and the changes are usual fluctuations and based on performance analysis. In fact we are raising the headcount