Bengaluru: Infosys Ltd Tuesday reported better than expected 5 percent rise in June quarter net profit and raised its full-year sales growth forecast as business revamp helped it win more IT contracts.
The nation's second-largest outsourcing company reported consolidated net profit of Rs 3,030 crore, or Rs 13.26 per share, in the April-June quarter as against Rs 2,886 crore, or Rs 12.63 per share in the same period a year ago.
The firm, under its first non-founder chief executive, raised sales forecast for the financial year ending March 31, 2016 to 7.2-9.2 percent in US dollar terms. The growth projection made in April was 6.2-8.2 percent.
Infosys added 79 clients in the April-June quarter, winning contracts from companies including UK department store chain House of Fraser and UAE-based Sharjah Islamic Bank. Six deals were worth more than USD 50 million in value each.
Infosys shares soared 11 percent, the biggest intra-day jump in two yeas, to close at Rs 1,112.65 on the BSE.
The consolidated revenue grew 12.4 percent in the first quarter of the current fiscal to Rs 14,354 crore, from Rs 12,770 crore in April-June of 2014-15.
"Our efforts in redesigning our clients' experience and our widespread adoption of innovation, both in grassroots and breakthroughs, are starting to bear fruit in large deal wins and in the growth of large clients," Infosys CEO and Managing Director Vishal Sikka said.
Dipen Shah, Head of Private Client Group Research at Kotak Securities said Infosys' results beat its estimates on the revenue front.
"The highlight of the results was the strong constant currency revenue growth of 4.4 percent, led by volume growth of 5.4 percent. The volume growth was the best in the past 19 quarters," he said.
Infosys is now focusing on leveraging new technologies like automation and artificial intelligence to improve win percentages. It has also acquired two companies -- Skava and Kallidus -- to add new technology capabilities and ramp up revenues.
Sikka was brought in about a year ago to help the country's second-largest software services firm regain ground lost to rivals like Tata Consultancy Services and HCL Technologies.
Confident about being on track for its USD 20 billion revenue target by 2020, Infosys said it expects 10-12 percent revenue growth in constant currency terms in 2015-16.
Infosys expects revenue to grow by 7.2-9.2 percent in USD terms, and 11.5-13.5 percent in rupee terms, from the earlier guidance of 8.4-10.4 percent and 6.2-8.2 percent.
Industry body Nasscom expects the Indian IT-BPM sector to grow 14-16 percent in dollar terms for the fiscal.
"While Infosys is still early in its journey to become the leading next-generation services company, this gives a good momentum for the rest of the year," Sikka said.
However, in US dollar terms, its consolidated net profit declined 1.3 percent to USD 476 million in the first quarter of 2015-16, while revenue rose 5.7 percent to USD 2.25 billion.
"We are operating within our stated margin band, balancing strategic investments and client focus with operational efficiencies," Infosys CFO Rajiv Bansal said.
Pricing environment is competitive, which Infosys is addressing through automation and improvement in productivity, he added.
Infosys added 79 clients in the April-June quarter of the current fiscal, signing six large deals with a total contract value of USD 688 million. Its volume growth stood at 5.4 percent.
The company added 3,336 employees, taking its headcount to 1,79,523 employees as on June 30, 2015. Its attrition rate was at 14.2 percent for the said quarter, down significantly from 23.4 percent a year earlier.
On acquisitions, Sikka re-iterated that the company is looking at buying small companies working on innovative technologies.
"We are very confident of our organic strategy, which we want to compliment with select acquisitions of great companies as we see them... (We aspire that) by 2020, USD 1.5 billion out of USD 20 billion coming from acquisitions," Sikka said.
Infosys expects USD 1.5 billion to come from new acquisitions, USD 2 billion from new technologies and the remaining USD 16.5 billion from the traditional business.
"We had expected to reach industry-leading growth by mid next year. We are on track for that," he said.
For the entire 2014-15 fiscal, Infosys had clocked revenue of USD 8.71 billion.
Liquid assets, including cash and cash equivalents, available-for-sale financial assets and government bonds, were Rs 30,235 crore in the quarter under review compared to Rs 32,585 crore as on March 31, 2015.
The company is on track to achieving the aspirational target of USD 20 billion in revenues, 30 percent in operating margin and USD 80,000 annual productivity per employee by 2020 through organic and inorganic growth, Sikka said.
"We intend to achieve USD 1.5 billion revenue through mergers and acquisitions (M&A) and grow in double digit (13-13.5 percent) over the next five years to touch USD 18.5 billion in organic growth," he added.
The company is seeing the impact of initiatives taken during the last couple of quarters on technology and operational fronts, resulting in highest revenue growth of 7 percent in 15 quarters and volume growth of 5.4 percent in 19 quarters, he said.
"We are seeing the impact of initiatives taken during the last couple of quarters on technology and operational fronts, resulting in highest revenue growth of seven percent in 15 quarters and volume growth of 5.4 percent in 19 quarters," he said.
Infosys Chief Financial Officer Rajiv Bansal said employee engagements, promotions, wage hikes and cross- currency volatility have impacted the company's operating margin by 1 percent sequentially to 24 percent from 25 percent in last quarter.
"We had USD 23 million exchange gain in the March quarter and in the first quarter, we lost USD 3 million due to the rupee depreciating against all major global currencies," Bansal said.
The hiring will be in line with the company's business needs during the remaining three quarters, as it has been able to reverse attrition rate and retain as many employees as possible, he added.
Infosys Chief Operating Officer U B Pravin Rao said the pricing continues to be under pressure in existing lines of service, he said.
Due to decline in oil prices, discretionary spending in energy sector is challenging and the company's revenue earnings will be under pressure, he added.
With Iran expected to resume exports, oil prices will be under pressure, as they had gone below USD 50 per barrel, Rao said.
