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Murthy effect: Infosys returns to double-digit growth

Indian IT bellwether Infosys has bounced back with double-digit (12 per cent) revenue forecast this fiscal (2013-14) and revival in fortunes on return of its co-founder N R Narayana Murthy as executive chairman.

Fakir Balaji   Mysore     Last Updated: January 10, 2014  | 15:05 IST
Murthy effect: Infosys returns to double-digit growth
Infosys co-founder Narayana Murthy

Indian IT bellwether Infosys has bounced back with double-digit (12 per cent) revenue forecast this fiscal (2013-14) and revival in fortunes on return of its co-founder N R Narayana Murthy as executive chairman.

Revising its guidance upwards once again, the global software firm on Friday said its consolidated revenue would grow 12 per cent in dollar terms this fiscal (FY 2014).

A month (June 1, 2013) after Murthy returned from retirement to head the company, annual guidance was revised to 9-10 percent in July 2013 from 6-10 per cent given in April 2013, in dollar terms as 97 per cent of its revenue is from exports, with the US accounting for 60 per cent and Europe 25 per cent.

In rupee terms, revenue forecast has been revised to 25 per cent from 22 per cent estimated in July and 17 per cent in April.

"The year ahead looks exciting for the IT services industry. We believe the global economic environment has improved and our clients are gaining confidence to invest in their strategic initiatives," Infosys chief executive S.D. Shibulal said in a statement at the company's headquarters, about 150 km from Bangalore.

The company's board of directors met to finalise the quarterly results at its 350-acre sprawling campus on this city's outskirts, where it houses its largest leadership training institute and development centre.

With stock markets cheering the revised annual guidance and robust sequential growth (9.9 percent) in third quarter (Oct-Dec) of this fiscal, the company's blue chip scrip gained over three percent in value to a high of Rs 3,575 from opening price of Rs 3,494 per share of Rs 5 par value within an hour of trade opening on the Bombay Stock Exchange.

Earlier in the day, the company reported net profit of Rs 2,875 crore for third quarter, posting 19.4 per cent sequential growth (quarter-on-quarter) and 21.4 per cent year-on-year (YoY) growth in rupee terms.

Similarly, consolidated revenue for the quarter under review (Q3), increased to Rs 13,026 crore, registering 25 per cent YoY growth but sequentially marginal (0.5 per cent) in rupee terms.

Under the International Financial Reporting Standard (IFRS), net income rose to $463 million, posting 21 percent sequential growth and 6.7 percent YoY growth, while gross revenue increased to $2.1 billion, which is 1.7 per cent sequentially and 9.9 per cent YoY.

"We continue to differentiate ourselves to seize growth opportunities. The recent changes in organisational structure will enable us to strengthen client relationships and increase market share," Shibulal asserted.

As clients are looking for cost optimisation, the company sees more opportunities in ensuing quarters as they want of reduce the cost of ownership.

"There is an uptake in our business. Annual client budgets are stable. We expect to continue to win large transformational and outsourcing deals," Shibulal said after the board meeting.

"We are also seeing stable pricing while large deals are price sensitive. Billing is comfortable," Shibulal noted.

The company and its subsidiaries worldwide added 54 clients during the quarter, with more multi-million dollar clients than in previous quarters and taking the total (active) to 888 from 873 quarter ago and 776 year ago.

Liquid assets, including cash and cash equivalents (reserves) increased to Rs 27,440 crore ($4.44 billion) at the end of third quarter (December 31) from Rs.26,907 crore ($4.35 billion) at the end of second quarter (September 30).

"We saw early but promising results of our initiatives to increase efficiency in our operations during the quarter," chief financial officer Rajiv Bansal said in the statement.

Operating margin went up 1.5 per cent to 25 per cent from 23.5 per cent in second quarter.

The company's non-operative income increased during the quarter due to less volatility in the currency market.

"As dollar remained bound in a range, we gained $19 million from the exchange rate as against $14 million loss incurred in second quarter when currency volatility was higher," Bansal said.

On the hiring front , though the company worldwide added 6,682 techies, net addition was negative (-1,823) as 8,505 engineers left during the quarter, leading to attrition rate (excluding subsidiaries) touching 18.1 per cent from 17.3 per cent quarter ago and 15.1 per cent year ago.

As a result, for the first time, the company's total number of employees declined to 158,404 from 160,227 quarter ago and as against 155,629 year ago, with software engineers accounting for 148,740.

"Our onsite ratio of people working is coming down though we have enough visas. We plan to hire more locals, including from colleges in the US and Europe,a Shibulal added.

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