BS REPORTERS Bangalore/Mumbai, 9 October
Setting a positive tone for the IT sectors quarterly earnings performance, Infosys Technologies, Indias second-largest IT services provider, marginally beat market expectations to post a 7.5 per cent increase in consolidated (Indian GAAP) net profit to touch Rs 1,540 crore for the second quarter ended September 30, 2009 against the corresponding period of the last financial year. Its top-line grew 3 per cent to touch Rs 5,585 crore.
Compared to the trailing quarter, the companys net profit moved up a shade under 1 per cent and its top-line rose 2 per cent.
The management attributed the growth to a recovery in business margins, favourable currency movements and greater traction in offshore projects. The company recorded a2.3 per cent growth in volumes on the back of a revival in IT spending by clients.
Net profit margins improved 114 basis points yearon-year, but declined 33 basis points sequentially to 27.6 per cent, due to a higher tax outgo for the quarter. Moreover, since more work moved offshore (that is, on Indian shores), the company could record a 3 per cent gain.
Under US-GAAP, however, revenues in the second quarter fell 5.1 per cent to $1.154 billion from $1.216 billion a year earlier, while net profit after tax declined 0.9 per cent to $317 million from $320 million.
Infosys recorded sequential revenue growth in US dollar terms, after witnessing a decline for the last three quarters.
"Clients are looking to invest in a few strategic initiatives and relationships to maximise value from opportunities when the economic downturn ends," Infosys CEO S Gopalakrishnan told reporters here today.
The markets initially reacted positively to his assertion that the business climate has improved. The Infosys stock opened around 1.6 per cent higher than its previous closing figure, but ended the day at Rs 2,178.35 — around 1.5 per cent down on the Bombay Stock Exchange.
Analysts attributed the fall to currency volatility (the strengthening rupee against the US dollar) which could significantly affect Infosys margins in the coming two quarters. Besides, analysts say the Infosys stock is currently valued at 22 times its earnings, which decreases the attraction of holding the stock.
Infosys has indicated that its third quarter (October-December 2009) revenues would see a decline of 1 to 2 per cent on a year-on-year basis, while its year-end revenues would also dip by 1-1.3 per cent.
True to my analysis, Infosys has given a better guidence for the coming year and that despite of the fact that Rupee is appreciating against dollar.
This anoucement comes in line of my view that I wrote in recent post that new frontiers are opening up for IT sector and they are European countries and as IT cos will now be dealing more with Euros and Pounds the loss they use to see with dollar depreciating will be minimized.There are many analyst who became negative on IT sector with dollar becoming weaker.
I was perhaps one of them who categorically wrote that IT sector can be a next sector to watch for in next bull run.....
Genesys Int which I recomended in my latest list has already started making new 52 week highs.....
In other sector Sudal Ind is making newer highs and has crossed half century mark....