Infosys Q2 profit beats estimates, ups forecast

Infosys Technologies Ltd., India's second-largest software exporter, beat market estimates with a sharp rise in quarterly profit on Wednesday and raised revenue and earnings forecasts, sending its shares up nearly 4 percent.
Infosys said it planned to sell up to 30 million shares in its latest offering of sponsored American Depositary Receipts (ADRs), which could be valued at nearly $1.5 billion at its closing price on the Nasdaq on Tuesday.
The company, whose clients include ABN AMRO, Goldman Sachs and Airbus, first sold ADRs and listed on Nasdaq in 1999. It subsequently made two sponsored ADR offerings, one in 2003 and in 2005.
Its shares surged to a record 2,024 rupees before closing up on the day at 1,981.35 rupees in a flat Mumbai market.
The company reported a 53.5 percent rise in profit for the July-September quarter as outsourcing demand outstripped rising salary costs in Asia's fourth-largest economy.
"All around growth of our large accounts has been a significant factor in the growth," chief executive and managing director Nandan Nilekani told reporters.
He said outsourcing business would continue to grow despite a possible economic slowdown in the United States, which accounted for 63.7 percent of the company's revenue in the September quarter compared with 65.4 percent a year earlier.
"The profit is better than expected -- the buoyancy in its business is the reason and is now visible to all," said Jignesh Shah, head of equity at ABN AMRO private banking.
"Operating profit margins have also improved much higher than what was estimated by the street."
Infosys said it had added 45 new clients, while business in Europe continued to grow at a faster rate than in other regions and accounted for 25.8 percent of revenue in the quarter, against 23.7 percent a year ago.
Infosys, which the market values at $23.1 billion, raised its 2006/07 revenue forecast to 138.53-138.99 billion rupees, up 45.5-46 percent from a year ago, and forecast full-year earnings per share of 66 rupees, up 46.6 percent from a year ago.
The previous sales forecast was 133.5-134 billion rupees, and the previous forecast for the EPS rise was 38.3-39.6 percent.
July-September Indian GAAP net profit rose to 9.30 billion rupees ($203 million) from 6.06 billion rupees a year earlier, beating a median net profit forecast for 8.5 billion rupees in a Reuters poll of 14 brokerages.
DOUBLED REVENUE
Infosys develops applications, designs supply chains and offers back-office facilities, and ranks behind Tata Consultancy Services Ltd. (TCS) in India's $23 billion software services export industry. The company has roughly doubled its revenue over the past two business years to more than $2 billion.
Margin pressure eased in the past quarter as the company saw through wage hikes in April-June and billing rates improved 3-4 percent for new customers. New business accounted for just 5 percent of its revenue, Nilekani said.
India's booming software and back-office industry, which gets 90 percent of its revenue from overseas clients, expects exports to rise 27-30 percent to $29-31 billion in the year to March 2007.
Contracts worth a total $100 billion are coming up for grabs over the next two years, according to estimates from India's National Association of Software and Service Companies.
But some firms, including Infosys's competitors such as Bangalore-based Wipro and Hyderabad-based Satyam Computer Services Ltd., could see fiscal second-quarter margins squeezed as they fork out higher salary increases to stop staff straying to global firms such as IBM.
TCS is due to report its quarterly results on Monday, with Wipro due on Oct. 18.
Infosys will add a gross 9,500 workers in the next two quarters to March 2007 in a payroll that saw attrition of 12.9 percent in the September quarter as compared to 11.9 percent in April-June. Big players like IBM and Accenture are hiring in India by the thousands to catch up and stay competitive.

Source : Reuters