Infosys CEO S. Gopalakrishnan, (R), and COO S.D. Shibulal look on after announcing the company's quarterly financial results.


BANGALORE: India’s tech bellwether Infosys delivered a mixed bag as it unveiled the much-anticipated first quarter story.


The projection of higher revenue in rupee terms for the financial year from its earlier estimates provided some cheer to an otherwise muted business outlook. Infosys, the second-largest IT services exporter from India, posted a reasonable 6.9% increase in quarter-on-quarter revenue for the first quarter of FY09, but has remained very cautious about the future.


On the eve of announcing its first quarter financial results here on Friday, Infosys CEO S Gopalakrishnan said: “We are very cautious about the environment and we do not know how long it will last... There might be some more bad news.” The IT outsourcing industry has been going through uncertain times given the backdrop of a slowdown in US economy, which many observers say could be invading most other markets too.


For Q1FY09, Infosys reported a revenue of Rs 4,854 crore, recording a q-o-q growth of 6.9% while the net profit stood at Rs 1,302 crore (this includes a tax reversal of Rs 31 crore) showing a q-o-q growth of 4.2%.Infosys has revised its revenue guidance upwards — in rupee terms only — for the entire fiscal. As against its earlier guidance of Rs 19,894 crore to Rs 20,214 crore, it now stands at Rs 21,278 crore to Rs 21,622 crore, showing a year-on-year growth of 27.5% to 29.5%.


The earnings per share (EPS) has been revised upwards from Rs 99.34 to Rs 101.06 and for the first time, it has crossed Rs 100. In a falling stock market, Infosys shares dropped to Rs 1,676, down 7.18% on BSE. Infosys CFO V Balakrishnan said that higher guidance has been mainly due to the rupee depreciation. However, the company has maintained its dollar guidance, given during the start of the current financial year.


The falling rupee has come in handy for Infosys, as it has now pegged the currency against the dollar at Rs 43.04 from the previous level of Rs 40.02 in Q4FY08. It expects the currency to remain volatile and the hedge has gone up to $811 million from the previous level of $760 million. For the first quarter, Infosys saw its operating margins drop marginally to 30.46% from 32.5% in the fourth quarter of FY08, primarily on account of increase in wages and visa costs. Infosys chief operating officer SD Shibulal said they expect the margins to remain within this narrow range.


The BFSI vertical, which contributed 34.5% of Infosys revenue in the first quarter, saw q-o-q growth of 4% (insurance) while manufacturing grew by 14%. Though the IT budgets of its clients have been finalised for the current calendar year, Infosys has seen majority of them either remaining at the same level or marginally hiked. This has a direct correlation with the pricing of its projects. On the future, Mr Shibulal said:


“Pricing will remain stable for the entire year and there will be no opportunity for uptake given the environment.” For first quarter, Infosys had an active client base of 567 with 49 new additions. Though the revenue contribution from its largest client dropped from 10.3% in Q4 FY08 to 7.9% in the Q1FY09. Infosys officials said barring the top client, the rest grew in the range of 3.8%. Mr Balakrishnan remarked:


“Ours is a portfolio approach which will see some clients growing and others will be slow.”


HIGHLIGHTS


*Revises revenue guidance upwards to Rs 21,278 crore to Rs 21,622 crore.


* EPS guidance stands at Rs 99.34-101.06,

crossing the Rs 100 mark for the first time.

* To hire 10,000 people in the second quarter.


* Adds 49 clients in the first quarter.

* Falling rupee brings positive impact of 2.5%

* Contribution of top client drops by 2.4% QoQ
var imgid = '3225319';var capt = 'Infosys CEO S. Gopalakrishnan, (R), and COO S.D. Shibulal