India's Infosys surprises with 20.7 pct profit growth

BANGALORE, India - Indian software giant Infosys Technologies reported a forecast-beating first quarter net profit jump of 20.7 percent Friday, soothing concerns about the impact of a global economic slowdown.

By (AFP)

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Published: Fri 11 Jul 2008, 6:52 PM

Last updated: Sun 5 Apr 2015, 12:49 PM

The country's second-biggest software firm began the earnings season for the key outsourcing sector by saying net profit over the three months to June hit 13.02 billion rupees (302 million dollars) from 10.79 billion a year earlier.

A weaker Indian rupee had boosted the bottom line, Infosys said in a statement, adding revenue rose 23.47 percent to 49.71 billion rupees for the quarter.

Indian software companies tend to get much of their income from the US, billing in dollars. A weaker rupee can help them to price their services more competitively and convert their dollar income into greater local currency.

Infosys chief executive S. Gopalakrishnan said an uncertain global economic environment could still hit IT spending in the short term, but added the firm saw "several growth opportunities" as customers wanted greater efficiency.

"Though margins were impacted due to increases in salary and visa costs, they were offset by a weaker rupee, which depreciated to 43.04 levels from 40.02 during the quarter," chief financial officer V. Balakrishnan told AFP.

Growth in the outsourcing sector, which covers activities such as software writing and call centre provision, has helped the Indian economy to expand rapidly over the last few years.

Infosys said it had added 49 new clients and 3,192 new employees over the quarter. Its shares rose 3.86 percent to 1,876 rupees Friday after earnings data, but closed sharply down 129.75 rupees or 7.18 percent to 1,676.45.

The firm predicted revenue of 212.7-216.2 billion rupees for the year to March 2009, representing growth of 27.5-29.5 percent. In dollar terms, the forecast was 4.97-5.05 billion dollars, indicating growth of 19-21 percent.

"As expected, Infosys revised its rupee guidance upwards for revenue growth," said Religare Securities analyst Anurag Purohit, adding his firm expected Infosys and other IT stocks to perform positively in the short term.

Citigroup said in a research note that its positive view on some IT stocks remained unchanged, saying outsourcing firms stood to gain from the fact that international clients were focused on cutting costs.

Infosys said the rupee would remain volatile.

"The rupee will be volatile, and under pressure due to the widening trade deficit," said Balakrishnan.

The rupee was quoted at 42.72 against the dollar on Friday.

Based on US accounting standards, revenues at Infosys rose 24.5 percent to 1.15 billion dollars over the first quarter against the same period last year, the company said.

North American revenue was flat for the year but constituted 62.6 percent of the total, while European revenue accounted for 27.3 percent, it added.

The US remains the largest market for Indian outsourcing firms. The sharp US economic slowdown has raised concerns about how they will fare in the future.

However, the outsourcing firms have expanded to Europe, Latin America and the Middle East to boost revenues in the increasingly difficult global economic environment.

Infosys Technologies was founded just 26 years ago by a group of software professionals led by N.R. Narayana Murthy, now the firm's chief mentor. Its growth has become emblematic of India's recent economic development.

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