• Investment World
• eWorld
• Brand Line
• Mentor
• Life
• Brand Quest
• The New Manager
• BL Club
• Smartbuy
• Books
• Gallery

Stocks

• Quotes
• SE Diary
• Scoreboard
• Open-End Mutual Fund

Foreign Exchange

• Rates
  
  

Shipping

• Ports
  
  

Archives

• Yesterday
• Datewise
• Resources
• In Focus
• In Depth
• Events 2007

Group Sites

• The Hindu
• The Hindu ePaper
• Business Line
• Business Line ePaper
• Sportstar
• Frontline
• The Hindu eBooks
• The Hindu Images

K. Venkatasubramanian

BL Research Bureau

Infosys Technologies has delivered a set of numbers that bettered its guidance as well as market expectations.

For the recent December quarter, the company's revenues grew 2.8 per cent sequentially to Rs 5,741 crore, while net profits also grew to the same extent to Rs 1,582 crore.

Ramp-up in volumes and revenues, pricing stability, and improvement in the BFSI vertical and the North American geography have been key to achieving these numbers. What must also be heartening to the investors is that Infosys' top 10 clients have increased contribution to revenues after a slumber over the last few quarters.

The key margin deterrent this time around was the heavy provision for taxation as the more of its operations move out from STPIs (which enjoy benefits) and into SEZs. This and factors such as a strengthening rupee and wage hikes may strain margins.

The industry body had indicated that BFSI and North America (the largest outsourcers) are stabilising. This observation seems to have been reflected in Infosys' numbers as these have increased contribution to revenues.

Business drivers

Volumes (person-months billed) have witnessed a 6.1 per cent increase, the highest in the last 3-4 quarters. More importantly, this has resulted in a 7.2 per cent increase in revenues in dollar terms, suggesting that the billing environment has improved substantially. Utilisation has also similarly witnessed an up-tick.

Infosys had also increased its selling and marketing expenses in the quarter. This seems to have resulted into better client-mining as a result of which it has seen revenues from its top 10 clients increase by about 130 basis points to 27.5 per cent.

All ingredients for topline growth seem to have come together this quarter. The movement against the dollar (five per cent in September-December) seems to have been managed reasonably well. If the rupee strengthens further from the company guided levels of 45.75, it may affect realizations.

The key worry though has been that application development and maintenance (ADM), a low-margin service has seen an increase in contribution to revenues. All the large-deals won in recent times seem to have ADM as the main component.

Tax incidence till operations move to SEZs is likely to be around 20 per cent (from 17 per cent levels), while in this quarter alone it has been over 22 per cent.

Though the company does enjoys net margins of over 27 per cent, this could well be down by a couple of per centage points, when all these factors including wage hikes play out.

But in a market looking for signals of revival in the IT spends, Infosys' numbers should give some confidence. Also the other top tier IT companies, numbers may surprise positively, as these are relatively aggressive in pricing and may well see as good if not stronger topline growth than Infosys.

More Stories on : Stocks | Software | Infosys Technologies Ltd | Microscope

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page

Copyright © 2010, The Hindu Business Line. Republication or redissemination of the contents of this screen are expressly prohibited without the written consent of The Hindu Business Line