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Infosys posts 73% jump in topline growth - Views on News from Equitymaster
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  • Apr 11, 2000

    Infosys posts 73% jump in topline growth

    Infosys Technologies Ltd. has posted a net profit of Rs 2,935 m on annual sales of Rs 9,210 m for the financial year ended 31st March 2000.

    Infosys Technologies Ltd also known as Infy is India’s leading software major with a presence in all major areas of software development and software solutions.

    The company has performed significantly well in the fourth quarter of the current year, notching up revenues of Rs 285 m and net profit of Rs 85 m as compared to revenues of Rs 153 m for the fourth quarter of 1998-99 and net profits of Rs 43 m.

    The coming year should see a consolidation in employee costs because of increasing supply of manpower and the company’s attractive employee stock option plan. The company is also planning to move into high value segments of software such as internet, e-commerce and related areas, where margins are much higher.

    It has added new clients such as Capital One Service, Sainsbury, Cario and SAP which will contribute towards growth in topline. It derives 48% of its revenue from its top ten clients, most of whom are Fortune 500 companies. These clients are highly satisfied with the company’s service and the company can look forward to further orders from them.

    It proposes to open new software development centres at Mysore, Mohali and Toronto. which will add to the growth in revenue of the company in the forthcoming years. The number of employees have gone up from 3,900 to 5,200 during the current year.

    Some concerns have been expressed about the increase in the company’s income on account of the write back of provisions to the extent of Rs 75 m. This write back appears to be fair enough as it is on account of Y2K which has been totally overcome.

    The company which is the market leader in banking automation, with products such as Bancs 2000 is ideally positioned to take full advantage of the rapid technological changes sweeping across banks, with several private sector banks already offering a suite of tech-savvy products and public sector banks having no options but to follow suit. As there are comparatively fewer players in this sector, the company can expect higher margins on such revenue.

    (Rs m) 4QFY99 4QFY00 Change FY1999 FY2000 Change
    Sales 1520 2774 82.5% 5,089 8,823 73.4%
    Other Income 18 77 327.8% 39 391 916.4%
    Expenditure 903 1694 87.6% 3,210 5,426 69.0%
    Operating Profit (EBDIT) 617 1,080 75.0% 1,879 3,397 80.8%
    Operating Profit Margin (%) 40.6% 38.9%   36.9% 38.5%  
    Interest - - - - - -
    Depreciation 144 187 29.9% 359 532 48.3%
    Profit before Tax 491 970 97.6% 1,559 3,256 108.9%
    Tax 59 120 103.4% 229 397 73.1%
    Profit after Tax/(Loss) 432 850 96.8% 1,329 2,859 115.1%
    Net profit margin (%) 28.4% 30.6%   26.1% 32.4%  
    EPS (Rs) 13.0 25.6   40.1 86.1  

    The company which is almost debt free is also considerably helped by the fact that it has a negligible interest burden.

    Though the overall results are more or less in line with market expectations, the company could have possibly fared better had it forayed into handling Y2K projects, where quite a few competitors made substantial profits.

    For the next year revenue is likely to go up exponentially on account of the government’s decision to permit acquisitions upto 10 times of export earnings. The company would certainly acquire companies abroad to grow faster.

    Though export income has been made taxable henceforth in a phased manner from 20% to 100% over the span of the next five years, the company’s bottom line is unlikely to be affected as it has a number of units in software technology parks, income from which are tax free.



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