Performance on par: Infosys Q3 results
he quarter ending 2001 was the most challenging for Indian IT companies. Post September 11, the US economy declared an official recession worsening the existing bleak market sentiment. Software spending continued to weaken globally and the events of September 11 led to uncertainty in the external environment. '' A host of Indian Indian service providers such as Aztec Software and People Soft announced profit warnings in early December.
In this scenario, Infosys Technologies kick-started the calendar year 2001 by posting a modest 23.87 per cent increase in net profit for the quarter ended December 2001. Although profits were in line with y-o-y target, markets remained depressed. Infosys shares dipped by 4 per cent immediately after announcement of results and continue to witness erratic movement. Considering the tough conditions after September 9/11 the results although not spectacular are proof of the software bellwether's ability to survive the downturn better than its Indian counterparts. ``This quarter was one of the most challenging, both for Infosys and the Indian software industry'', N R Narayana Murthy, Chairman and CEO, Infosys said. The company clocked a profit of Rs. 206.04 crore as against Rs. 166.33 crore achieved in the corresponding quarter during the last fiscal year. Compared to the same quarter in the previous year, the total income for the quarter registered 23.01 per cent at Rs. 660.81 crore as against Rs. 537.07 crore.
An analysis of the income break-up in terms of overseas and domestic income shows a 59.13 per cent increase in domestic income to Rs 12.46 crore in 2001 as compared to RS. 7.46 crore in the corresponding quarter last year. In contrast overseas income increased by 22.51 per cent to 648.35 crore from 529.24 crore. The quarter to quarter increase in domestic income was 5.06 per cent as compared top 1.58 per cent in overseas income. However India' overall share in revenues was a marginal 1.9 per cent. North America continued to be the largest market in third quarter accounting for 70.9 per cent of the revenue, Europe contributed 19.4 per cent, up from 18.9 per cent a quarter ago, and the rest of the world accounted for 7.8 per cent to December quarter's revenue.
The company added 39 new clients such as SunAmerica Inc - a leading financial services company - Aizawa Koatsu Concrete KK - Japan's largest concrete manufacturer - Texas Instruments, Spatial Wireless and the Hertsmere Borough Council of National Health Service, UK as against 29 in the previous quarter. The quarter to quarter profit however increased by a mere 2.2 per cent. Revenue growth failed to correspond with growth in volumes and is indicative of continued pricing pressure. Revenue growth comprising volume growth of 3.4 per cent offset by a price decline of 3.2 per cent. "We experienced an increase in pressure but quarterly revenue growth was impacted due to pricing pressures, " confirmed Deputy Managing Director S Goplakrishnan. The management has also indicated that the ramp-up in clients has not been as quick or high as in the past.
The increase in the number of clients led to a better spread of revenues. Revenues from top five and top 10 customers stood at 24.1 per cent and 38.3 per cent as compared to 25.3 per cent and 39.7 per cent in the previous quarter.
In addition, software development expenses for the sequential quarter increased by 0.83 per cent as against 1.64 per cent increase in income. The stagnant staff utilisation rate (77.6 per cent) for sequential quarters was a contributory factor for the high increase. The company's general admin expenses have also shown a substantial increase of 6.45 per cent as compared to the corresponding quarter last year.
For the upcoming quarter, the company has indicated that income for software development and products would be between Rs. 636 crore and Rs. 660 crore. The earnings per share is expected to be between Rs. 30 and Rs. 32. The income from software development services and products is expected to be between Rs. 2,560 crore and Rs. 2,584 crore. The earnings per share are expected to be between Rs. 120 and Rs. 122.
However the slowdown in technology spending lengthening sales cycle, sustained billing pressure in 2002 vis-à-vis the actual spend in 2001 might prolong the uncertainty facing the revenue stream.
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