Infosys posts robust 6.6% growth in Q3 profit; raises guidance

Bengaluru: Infosys Ltd on Thursday reported a better-than-expected 6.6 percent rise in its third quarter net profit and raised its annual revenue growth forecast, sending its shares up by as much as 5 percent.

Consolidated net profit rose to Rs 3,465 crore, or Rs 15.16 per share, in October-December as compared to Rs 3,250 crore, or Rs 14.22 a share, in the same period a year ago, Infosys said in a statement. India's second-largest software export service exporter also raised its annual revenue growth forecast on stronger demand for high-margin automation and other services.

Sales in dollar terms are set to grow between 8.9 per cent and 9.3 percent in the year ending March 31 as compared with an earlier guidance of 6.4 percent to 8.4 percent.

 

Infosys forecast is in contrast with its bigger rival Tata Consultancy which on Tuesday posted a 0.3 percent decline in third quarter dollar revenue on seasonal holidays, furloughs in the US and floods in Chennai, and may struggle to end this fiscal year with even an 8 percent growth.

Infosys Chief Executive Vishal Sikka, who was brought in about one-and-a-half years ago to chart a new strategy, said the strong performance was aided by the firm's innovative solutions and the new technologies it has adopted. "This combination helped us deliver encouraging results despite the traditional seasonality of the quarter and the additional headwinds, and will strengthen the execution of our strategy towards consistent profitable growth," he said. Consolidated revenues in October-December rose 15.2 percent to Rs 15,902 crore from Rs 13,796 crore in the year-ago period.

 

"We have been able to navigate the quarter, better than our earlier expectations," Infosys Chief Financial Officer M D Ranganath said in the statement. "We will continue to focus on enhancing operational efficiency." Shares of Infosys were up 4.96 percent in afternoon trade at Rs 1,135.50 apiece, after having risen as much as 5.3 percent earlier, while the benchmark Sensex was down 1.1 per cent.

The October-December period is generally the weakest quarter for Indian IT players due to furloughs at client sites and a prolonged holiday season. Dipen Shah, Senior Vice-President and Head of Private Client Group Research at Kotak Securities, said Infosys' results beat estimates for the third successive quarter. "We believe that newer initiatives like zero distance, design thinking, automation, etc will shore up the growth rates of Infosys and sustain margins over the longer term," he added. In dollar terms, Infosys posted 0.4 percent jump in net profit to USD 524 million during the third quarter, while revenue was up 8.5 percent to USD 2.4 billion.

 

The company's net profit was higher 2 percent from Rs 3,398 crore in July-September 2015 quarter, while revenues grew 1.7 percent from Rs 15,635 crore in the second quarter of FY 2015-16.

"We have been able to navigate the quarter better than our earlier expectations. We will continue to focus on enhancing operational efficiency through multiple levers in the coming quarters," Infosys CFO M D Ranganath said. Infosys has posted a stellar set of numbers in the June and September quarters as well, raising investor hopes of a turnaround under Sikka, who took over as CEO in August 2014. Once an industry bellwether, Infosys lost out to rivals like Tata Consultancy Services and HCL Technologies in terms of growth.

Besides, it faced other issues like attrition and an exodus of senior-level executives. Infosys, under the leadership of Sikka, is targetting an aspirational goal of USD 20 billion in topline by 2020.

During the said quarter, Infosys added 75 (gross) clients taking the number of active clients to 1,045. On the hiring front, the software giant added 5,407 people in the October-December 2015 quarter to take the total headcount to 1,93,383.

It has been able to bring down attrition rates (annualised consolidated) from 21.3 percent in December 2014 and 19.9 percent in September 2015 to 18.1 percent in the said quarter.