Infosys beats forecasts despite fall in Q1 profit

BANGALORE (TIP): Infosys’ revenue rose moderately in the quarter ended June, but at the cost of profit, which took a hit partially on account of salary increases. Net profit declined by 1%, to $482 million, over the preceding March quarter. Revenue grew 2%, to $2.1 billion, over the previous quarter. Compared to the year ago period, revenue was up 7.1%, tracking the full-year revenue guidance of 7-9%. The numbers were better than the estimates of brokerage houses, resulting in the company’s share price rising by 1% on a day when the broader market fell steeply. It also helped raise the share prices of other leading IT companies, including TCS, Wipro and HCL Technologies. Infosys said it was maintaining the full-year revenue guidance of 7-9% that it had issued in April.

The guidance is lower than the 11.5% it did last year and the 13-15% that IT industry body Nasscom expects the industry to grow by this fiscal. Infosys CEO S D Shibulal, who retires at the end of this month, said the demand and pricing environments were stable. Some negative trends continue. The employee attrition rate rose to the highest ever level of 19.5% in the quarter. It was already an all-time high of 18.7% in the March quarter. “Employee attrition rates are worrisome and we are implementing various initiatives to retain good talent,” said the company’s COO Pravin Rao. Shibulal said the company “listened hard to employees” and found that they were more interested in a predictable salary and career growth than in the level of the annual increment.

“So even as we have given increments, we have reduced the variable pay and moved to quarterly promotions to support employees’ career growth. We promoted 7,500 employees last quarter,” he said. The company expects these measures to contain the attrition level. The operating margin, which had dropped precipitously in 2011-12 and 2012-13 but which had been rising steadily last year, has once again fallen back.

It is 25.1% in the June quarter, compared to 25.5% in the March quarter. The fall is partially on account of the salary increment effective April. But the operating margin would have been worse but for a 1.1 percentage point increase on account of a change in the way the company estimates the useful life of assets – which increased the life of the assets and consequently impacted depreciation levels.

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Volume 10 Issue 41 | New York | Oct 21

Print Edition ~ Digitally   Issue 41 ~ NYC ~ Oct 21  
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