Infosys Q1 net falls 2.6 per cent at Rs 1490 crore, raises annual outlook

Infosys Q1 net falls 2.6 per cent at Rs 1490 crore, raises annual outlook


BANGALORE: Infosys Technologies edged up its forecast on a revival in outsourcing demand from its mainstay financial clients, but its shares fell as markets worried a weak European economy could curb orders. India's No. 2 outsourcer reported a surprise 2.6 percent drop in April-June profit and its sales contribution from Europe fell to about 20 percent from nearly 25 percent a year ago and 23 percent in January-March. ( Watch )

The company, a trendsetter in the country's showpiece IT services sector, added 1,026 staff in April-June, with a total of 115,000 employees in June its slowest pace of addition in four quarters. The lower-than-expected profit and hiring triggered concerns of a slowdown in growth, sending its shares 2.8 percent lower in a flat market. The stock hit a record high on Monday.

The Bangalore-based software giant gained 38 extra clients for the quarter.

Infosys, known for its conservative outlook, has raised its full-year revenue growth forecast in dollar terms in the last three consecutive quarters. The company expects earnings per American depositary share to rise 5.2 percent to 9.6 percent for the year, up from its previous forecast of 4.3 percent to 8.6 percent. The guidance has been revised from Rs 25,017 crore or 10 percent YoY projected at the beginning of this fiscal in April.

"There are still concerns lingering over Europe's debts and if the economy there is weak, consumption should be weak too," said Huey Yang, a fund manager with HSBC in Taipei. Infosys and local rivals Tata Consultancy Services and Wipro have raised salaries by 10 to 20 percent on average to keep staff from being poached by global rivals in a strong market. India's export-driven software services firms, however, face uncertainty on orders from Europe, the second-biggest market for the industry after the United States. Infosys, which counts Goldman Sachs, BT Group and BP among its more than 550 customers, forecast its 2010/11 dollar revenue to rise 19 percent to 21 percent, higher than 16-18 percent projected in April. UNCERTAIN ENVIRONMENT "While the global economic environment remains uncertain, we continue to see greater demand for services from our clients," said Infosys chief executive S. Gopalakrishnan. "The challenge for the industry is to enhance the investment to grow the business, given the uncertainty in the environment." In a report this month research firm Forrester said Europe's volatile economic situation and uncertainty about corporate IT budgets would result in possible delays or cancellations of some outsourcing projects. Growing competition from IBM, Accenture and Hewlett-Packard also pose a risk to the sector, which manages complex computer networks and maintains technology operations for Fortune 500 customers. "The numbers are really bad at operating levels, they are 40-50 bps down than what we had expected," said Shradha Agarwal, analyst at Batlivala & Karnani Securities in Mumbai. "The numbers would not see a significant upgrade from these levels." Nasdaq-listed Infosys said net profit in its fiscal first quarter ended June 30 fell to Rs 1490 crore ($318 million) from Rs 1530 crore a year ago. Infosys reported under the International Financial Reporting Standards for the second successive quarter.

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Src: Economictimes.indiatimes