Infosys Technologies Ltd, the second largest Indian IT exporter, came out with a positive surprise on Friday when it reported 17% year-on-year rise in its quarterly net profit at Rs 1527 crore. Its topline, reported at Rs 5472 crore, beats the ET Intelligence Group’s revenue estimate of Rs 5245 crore. The stock market took this news positively and the Infosys stock surged by 2.5% to a flat Sensex during morning trade.
Infosys’ European business, which accounts for around one-fourth of total revenue, seems to have performed badly compared to business from US. Its US business declined by 2.7% following 6% appreciation in the rupee against the dollar. Revenue from the European market was expected to see some buoyancy given 8.5% depreciation in the rupee against the pound. However, it fell by 1.3% sequentially. The management has hinted at increased spending in sales & marketing activities. Given its poor show in Europe, a significant pie of this expenditure may go towards strengthening its sales & marketing activities in this region.
The operating margin for the June ’09 quarter expanded by around 50 basis points compared to previous quarter. However, this is not expected to continue for the rest of the year. The management expects the operating margin for the financial year 2009-10 to decline by around 150 basis points on account of increased spending on sales & marketing and lower utilization rates, among others.
Though June quarter is relatively better, the management has lowered the guidance for the full year keeping most of the negative factors in mind. It would be interesting to see whether other large Indian IT companies are also going to report a similar set of good numbers for the quarter ended June ’09.
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