Infosys projects first income fall

Infosys projects first income fall
The Financial Express, April 16, 2009, Page 1

fe Bureau, New Delhi, Bangalore

In a first in its 28-year history, Infosys Technologies, IT bellwether and the country’s second largest software services firm, on Wednesday forecast a revenue decline in this financial year. The Bangalore-based company said its 2009-10 revenue will drop by 6.7% to 3.1% to between Rs 22,066 crore and Rs 22,928 crore.

For the first quarter of current financial year, Infosys guided for revenues of between Rs 5,379 crore and Rs 5,480 crore, a decline of 8.2% to 6.5% on a year-on-year basis.

The market sees Infosys guidance as a benchmark for the sector’s performance as it is the only IT firm among the top five that gives full-year guidance.

Though the company’s earnings for the fourth quarter and the full year of 2008-09 were above market expectations, the inferior outlook for the current financial year unsettled the market.

The company’s share tumbled by 2.72% on the Bombay Stock Exchange to close at Rs 1370.80.

Analysts see the lower guidance as a signal that the current economic crisis has taken its toll on global outsourcing and that the earnings of other major software firms like Wipro Technologies and TCS could be weak.

“The amount of uncertainty today is unprecedented. This is probably one of the worst economic environments we have seen in our lifetime,” said S Gopalakrishnan, CEO, Infosys. “The wide range that the company has given in its guidance numbers reflects the uncertainty it is facing in the market. The guidance is much below the market’s expectations”, said an analyst with a brokerage firm.

For the fourth quarter ended March 2009, the company declared a net profit of Rs 1,613 crore, up 29% over the same quarter last year. The company’s Q4 revenue was at Rs 5,635 crore, up 24.1% year-on-year. In dollar terms, revenue declined 1.8% on a yearly basis and 4% sequentially.

For the full year ended March 2009, Infosys posted a net profit of Rs 5,988 crore, up 28.5% over last year. Its revenue for the full year were at Rs 21,693 crore, up 30%.

Infosys added 37 new clients in the quarter, 40% of which are in the financial services sector, and lost 41 clients. The company also pointed to the heightened pricing pressure in the quarter and the coming year. “The pricing for the quarter declined by 3%”, said SD Shibulal, COO, Infosys.

V Balakrishnan, CFO, told FE that the company expects pricing decline in the range of 6-6.5% in the current financial year.

“Infosys has always had premium pricing for its services compared to its rivals. Therefore, the pricing pressure on the company is more than on others,” said an industry expert.

The company made a gross addition of 4,935 employees during the quarter and 28,231 during the year, taking its employee base to 1,04,850. For the current financial year, Infosys plans to hire 18,000 more, mostly from campuses. The company has made 20,000 offers for this year. The company had total 579 active clients at end of the financial year. During the quarter, the company suffered a forex loss of Rs 15 crore.