Infosys record strongest profit growth in three years

Infosys record strongest profit growth in three years

India's second-largest software services firm, Infosys Technologies Ltd., posted its biggest quarterly profit jump in three years as telecoms and financial companies increased outsourcing.

Driven by surging revenues and stable margins, Nasdaq-listed Infosys said on Tuesday its second-quarter profit jumped 49 percent to a record high, beating market forecasts.

The company raised its full-year earnings per share growth forecast to 43 percent from 34 percent, citing higher prices paid by new clients.

"The last two quarters have been good. This quarter has been one of the highest (in growth). That momentum is there behind us," Chief Operating Officer Kris Gopalakrishnan said in an interview at the company's sprawling Bangalore campus. "We have been able to maintain margins, in spite of adding 5,000 people."

Infosys added 32 clients last quarter, including retailers, utilities, telecoms companies and insurers, taking its total to 431 in India's red-hot technology services sector, where exports worth $12.5 billion are seen soaring to $50 billion by 2009.

Customers for its software and back-office services include computer maker Dell Inc. and retailer J.C. Penney Co. Inc., reflecting a controversial trend among U.S. firms to outsource work to India, where wages are typically a fifth of those paid at home.

Infosys said net profit in the September quarter was 4.47 billion rupees ($97 million), up from 3 billion a year before and above a median forecast of 4.32 billion in a Reuters poll.

Revenue grew 52 percent to 17.5 billion rupees, against a median forecast for 16.9 billion, and Infosys raised its full-year revenue growth forecast to 47-48 percent from 39-40 percent.

Company officials said work done at client sites, which costs more, fell marginally. Chief Financial Officer Mohandas Pai told a news conference that $30 million worth of investment this year would keep operating margins "relatively flat".


"The profit number is superb based on the robust top-line." said Chetan Shah, portfolio manager at Fortis Securities. "The higher guidance is mostly priced in and the stock should stabilise above 1,700-rupee levels."

Infosys, which had already rallied 22 percent in the past three months, closed 1.6 percent higher at 1,712 rupees. It earlier flirted with its highest for nearly four years.

"I see tremendous upside for the stock from here," said Pranav Securities analyst Nimesh Mistry.

The company shrugged off concerns about a stronger rupee and said it gained from moderate hedging, squashing market concerns sparked on Monday when smaller rival MphasiS BFL Ltd. blamed foreign exchange losses for its disappointing profits.

The company's headcount is just 51 short of 33,000, and 90 percent of the 5,010 staff added last quarter were in software. Infosys expects to hire about 2,000 more workers in the full year than the previously planned 10,000.

Its telecoms customers grew fastest, outpacing manufacturing to become its second-largest sector after financial services.

Telecoms revenue grew 77 percent to 3.04 billion rupees, financial services grew 34 percent to 5.84 billion and manufacturing grew 49 percent to 2.58 billion.

Chief Executive Officer Nandan Nilekani said business was supported by global telecoms service providers cutting costs and switching to newer technologies like voice-over-Internet.


Gopalakrishnan saw fading concerns over job losses in the United States, where outsourcing has been a controversial issue in the run-up to November's presidential election.

"It seems to be behind us. There seems to be less concern coming closer to the elections," he said.

But hiring new staff was tougher due to competition from multinational companies, and increasingly Indian rivals.

Infosys raised salaries for select employees in the September quarter, on top of a 17 percent rise earlier this year. Staff turnover was 10.8 percent in the quarter, little changed and below the industry's average of around 17 percent.

Late on Tuesday, industry leader Tata Consultancy Services reports its first results since it listed in August. Third-ranked Wipro Ltd. reports earnings on Friday.

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