Infosys Profit Rises 33%, Beating Estimates on Orders (Update3)
By Suresh Seshadri and Andrea Tan
Jan. 13 (Bloomberg) -- Infosys Technologies Ltd., India’s second-largest computer-services provider, said third-quarter profit climbed to a record after winning outsourcing orders from clients seeking to cut costs amid the global recession.
Net income rose 33 percent to 16.4 billion rupees ($336 million) in the three months ended Dec. 31, from 12.3 billion rupees a year earlier, Bangalore-based Infosys said today. That’s the fastest pace in six quarters and higher than the 15.4 billion rupee median of 18 analyst estimates compiled by Bloomberg.
Chief Executive Officer S. Gopalakrishnan may win more orders from customers defecting from smaller rivals Satyam Computer Services Ltd. and Wipro Ltd. Satyam Chairman Ramalinga Raju was arrested last week in India’s biggest corporate fraud investigation while third-ranked Wipro disclosed it was barred from working for the World Bank for offering its employees shares in the company’s stock offer in the U.S. in 2000.
“The results were slightly better than expectations,” Ajay Bodke, who helps look after about $1 billion in equities including Infosys shares at IDFC Assets Management Co. in Mumbai, said by phone. “Infosys is going to be the biggest winner out of the Indian outsourcing industry after what’s happened with Satyam and Wipro.”
Infosys rose 5.4 percent to 1,221.95 rupees as of 1:39 p.m. on the Bombay Stock Exchange, the biggest gain since Nov. 21. The stock dropped 37 percent last year, the best performer among India’s four biggest software exporters. The benchmark Sensitive Index lost 52 percent in 2008.
Hiring More Workers
Infosys, which had 103,078 workers at the end of December, plans to hire 3,700 in the current quarter, Chief Operating Officer S.D. Shibulal told reporters in Bangalore. That will take the total number of new hires for the year ending March 31 to 27,000, higher than an earlier estimate of 25,000.
Sales jumped 35 percent to 57.9 billion rupees, in line with the 57.1 billion rupee median of 21 analyst estimates compiled by Bloomberg. Earnings per share were 28.66 rupees versus 21.54 rupees a year earlier.
In dollar terms, revenue was $1.17 billion, less than the company’s October forecast of at least $1.18 billion. Earnings were 56 cents a share for the period, compared with its estimate of 57 cents.
Dollar Boosts Revenue
The Indian rupee fell 19 percent against the U.S. dollar last year, the second-worst performer among 10 Asian currencies tracked by Bloomberg. A weaker rupee boosts the value of overseas earnings when repatriated.
The software exporter estimates earnings in the year ending March 31 will be 102.92 rupees a share, higher than an Oct. 10 prediction of 101.06 rupees, after Infosys reduced the amount set aside for tax payments by 930 million rupees.
Full-year sales will probably range from 215.5 billion rupees to 217.6 billion rupees, more than the previously projected 213.1 billion rupees to 217.3 billion rupees, under Indian financial reporting standards, the company said.
Infosys, which counts Telstra Corp., Australia’s largest telephone company, among its customers, added 30 new clients during the quarter. It said last month it won a five-year multimillion-dollar computer-services order from AstraZeneca Plc, the U.K.’s second-largest drugmaker.
A survey of Infosys’s top 100 clients showed that several customers may outsource more services in 2009, Gopalakrishnan said on Nov. 17. The 53-year-old chief executive is betting that orders from the provider’s biggest clients may increase this year as the global recession forces companies to turn to cheaper labor.
Infosys clients plan to increase overseas outsourcing even as their budgets are likely to be lower this year, Gopalakrishnan said in an interview with broadcaster CNBC-TV18.
Satyam Woes
Satyam, India’s fourth-largest computer-services company, will have to restate earnings and may be broken up after its founder and former Chairman Ramalinga Raju was arrested for inflating cash and assets by $1 billion. Raju’s younger brother, Rama, and Chief Financial Officer Srinivas Vadlamani were also arrested. The government on Jan. 9 sacked Satyam’s board for failing to do its duty.
Infosys isn’t “actively going after” Satyam’s clients or employees,” Shibulal said.
Revenue growth for Indian computer-services companies may slow to 6 percent this year, from 20 percent in 2008, as global information-technology spending shrinks 4 percent, Goldman Sachs Group Inc. said in a Jan. 11 report.
Tata Consultancy Services Ltd., India’s biggest software- services provider, is due to report earnings on Jan. 15, followed by Wipro on Jan. 21.
“Once the dust settles in a month or two, we’ll probably have a clearer idea of where Infosys stands,” Viswanathan Vasudevan, who helps manage $300 million including Infosys shares at Aquarius Investment Advisors Pte. in Singapore, said before the earnings were announced. “We’ll have to see how Infosys copes with the challenges in the industry.”
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