Tuesday, 15 April 2014

Infosys results: 9 things to know

Starting the result season for Indian IT companies, India's second-largest IT company Infosys has announced its fourth quarter results for the fiscal year ending March 2014. Infosys reported 25% jump in net profit at Rs 2,992 crore for the quarter ended March 31, 2014, as compared to Rs 2,394 crore in the same period last fiscal.

While the company's revenue for the quarter stood at Rs 12,875 crore, a 23.2% jump from Rs 10,454 crore in the year-ago period.

Here are nine key takeaways from Infosys' results for the fourth quarter of 2013-14.

Guidance below industry average
Infosys expects fiscal 2015 dollar revenues to grow in the 7-9% range. This is below the industry average of 13-15%. Software industry body Nasscom expects IT export to grow between 13-15% during the fiscal year 2014-15.

In rupee terms, Infosys expects revenues to grow between 5.6-7.6%, this means that the company is factoring in some negative impact of currency conversion.

Attrition continues to be a worry
Rising employee attrition continues to be a worry for Infosys. The Bangalore-based company said that its attrition during the March quarter stood at 18.7% compared to 18.1% in the December quarter. The attrition rate stood at 16.3% during the same quarter a year ago. CEO SD Shibulal said that the attrition rate made the company uncomfortable.

"We are making all efforts to make attrition come down through compensation hikes, promotions, progressions, training programs, and a lot of communication, and multiple levels of communication has happened during the year," he told a media briefing post the results announcement.

Announces 6-7% salary hike
Infosys has raised salaries of its employees in the country by 6-7% and by 1-2% for onsite workers, effective April 1. "We have increased salaries. We have given salary hikes of 6-7% for offshore and 1-2% onsite employees, effective April 1," Infosys CFO Rajiv Bansal said.

"This is the second time we are giving compensation increase over the last nine months. Nine months back, we had given a compensation increase of 6-8% offshore," Infosys CEO and MD Shibulal said.

Hiring doubles
Infosys added 2,000 employees during the fourth quarter. With this, the company's total headcount across onsite as well as offshore work locations stands at 160,405. The number of net hires during the fourth quarter was almost double of 1,059 employees hired in the year-ago period.

On the lateral hiring front, the company roped in 2,100 employees, while the year-ago period saw it hiring 3,545 employees.

Billions in cash reserve
Infosys's cash and cash equivalents crossed $5 billion during the January-March quarter. The company's board has recommended a final dividend of Rs 43 per equity share for the financial ended March 31, 2014. Analysts expect clamour to grow for Infosys to do more with its cash hoard.


Robust deal pipeline
Infosys and its subsidiaries added 50 clients during the quarter and 238 during the year. The number of active clients was 890 compared to 888 in the previous quarter. Big client additions includes Chinese-owned Swedish automaker Volvo. The company also lost three large clients — two in the $100 million bucket and one in $200 million bucket.

The company's CEO SD Shibulal, however, claimed that the deal pipeline remains strong and the company has closed four large deals with a total contract value of $700 million.

Employee utilisation up
From the previous quarter, employee utilisation has improved. Utilisation rate for Infosys was 78% in fourth quarter, up 4.1% from the year-ago period. Improved employee utilisation rate shows that fewer engineers are sitting idle and more number of hours are being billed.


Growth march in Europe continues
Infosys revenue mix, in terms of geographies, largely remained stable. The company said its revenues from North America declined by 0.8% marginally during the fourth quarter, while the company's revenues from Europe, its second-largest market, rose 1.0%.

Infosys added 17 new clients in last quarters in Europe and for the full year, it crossed the 25% mark as a percentage of its global revenues. The company claimed it is now winning more deals in Germany and Switzerland.

Manufacturing leads
In line with its commentary from last month, Infosys reported a 3.5% decline in sales from retail sector customers. Sales from other large verticals such as financial services fell 0.5%, while manufacturing grew 0.4%.

Infosys reported a marginal hike in its revenues from business IT services, which includes traditional IT outsourcing areas such as application development, maintenance and testing. Sales from consulting and products, platforms and solutions business fell.