Infosys net up, dollar guidance down, stock slips

Bengaluru: Indian IT major Infosys Ltd on Friday reported double-digit net profit and revenue for April-June quarter, but lowered annual revenue guidance in dollar value, resulting in its stock plunging on the bourses.

Though consolidated net profit grew 13.4 per cent year-on-year to Rs 3,436 crore and revenue 16.9 per cent to Rs 16,782 crore for the quarter under review, the IT company lowered dollar guidance for fiscal 2016-17 to 10-11.5 per cent from 11.8-13.8 per cent projected in April due to currency volatility and headwinds.

As a result, Infosys scrip of Rs.5 per share (face value) slipped to Rs 1,072.25 at the end of Friday’s trading on BSE, losing Rs 103.60 or 8.8 per cent from Thursday’s closing price of Rs 1,175.85 and opening price of Rs 1,186.35 though it touched a high of Rs 1,195 and a low of Rs 1,058.30 in intra-trading.

The revised revenue outlook (is based on June 30 exchange rate of Rs 67.53 per dollar and 10.8-12.3 per cent on March 31 exchange rate of Rs 66.26 per dollar.

In constancy currency, consolidated revenue for the fiscal is expected to grow 10.5-12 per cent at June 30 dollar rate.

Infosys had said in April that its annual revenue would grow 11.8-13.8 in dollar value and 11.5-13.5 per cent in constant currency as per the March 31 exchange rate.

In rupee value, however, the annual outlook has been revised marginally upwards to 13.7-15.21 per cent on June 30 exchange rate from 12.7-14.7 per cent given in April and 11.7-13.2 per cent of March 31 exchange rate.

Around 85 per cent of the IT outsourcing firm’s revenues is billed in dollar and euro currencies as export earnings.

The company has hedged $980 million against cross currencies for the first six months of the fiscal to protect its exports from volatile forex markets.

Under the International Financial Reporting Standard (IFRS), the company’s net income in first quarter rose 7.4 per cent to $511 million and gross revenue 10.9 per cent to $2.5 billion.

Sequentially, net profit in Q1 declined 4.5 per cent from Rs 3,597 crore but revenue was marginally up 1.4 per cent from Rs 16,550 crore posted in previous quarter of 2015-16.

Under IFRS and in dollar value, net income in first quarter declined 4.1 per cent from $533 million though revenue was up 2.2 per cent from $2,446 million in Q4 of FY 2016).

“We had unanticipated headwinds in discretionary spending in consulting services and package implementations as well as slower project ramp-ups in large deals that we had won in earlier quarters, resulting in a lower than expected growth in Q1,” said Infosys Chief Executive Vishal Sikka in a statement.

Operating profit also declined 4.7 per cent sequentially to Rs.4,047 crore from Rs.4,200 crore in last quarter though up 17.4 per cent from Rs.3,447 crore in like period year ago.

Under IFRS in dollar value, operating income declined 3.7 per cent to $602 million from $625 million sequentially but was up 11.3 per cent from $541 million in same period year ago.

“We navigated a volatile currency environment effectively while our focus on optimising cost efficiency levers helped us during the first quarter,” said Chief Financial Officer M.D. Ranganath in the statement.

Earnings per share (EPS) also declined 4.5 per cent sequentially to Rs 15.03 from Rs 15.74 quarter ago.

The company added 95 clients during the quarter, including three in $100-million category, taking the total to 1,126 as against 1,092 quarter ago and 987 year ago.

“Our client additions and top client growth was strong during the quarter. Automation continues to be a core lever in the renewal of our traditional service offerings,” said Chief Operation Officer U.B. Pravin Rao.

Cash and investments, however, declined to Rs 33,212 crore ($4.9 billion) from Rs 34,468 crore ($5.2 billion) but increased from Rs 30,235 crore ($4.8 billion) year ago.