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Infosys: Disappointing end to the year

Apr 13, 2012

IT services major Infosys Ltd. has announced its fourth quarter results for the financial year 2011-2012 (4QFY12). The company has reported a 4.8% quarter-on-quarter (QoQ) decline in its sales and a 2.4% QoQ decline in its net profits. Here is our analysis of the results.

Performance summary
  • Sales declined by 4.8% QoQ during 4QFY12. This came on the back of 1.5% QoQ decline in volumes and 1.1% QoQ decline in average pricing. For the financial year ended March 2012 (FY12), sales grew by 22.7% year-on-year (YoY).
  • Operating margins declined by 1.3% QoQ to 29.9% during the quarter as compared to 31.2% recorded in the previous quarter (3QFY12). For FY12, margins declined marginally by 0.5% YoY as compared to the same period last year.
  • Lower operating margins and higher effective tax rate led to a 2.4% QoQ growth in net profits during the quarter. The decline would have been more if not for a huge growth of 54.5% QoQ in other income during the quarter. For FY12, net income increased by 21.9% YoY.
  • The company added 52 new clients during the quarter taking the total number of active clients to 694.
  • Management has given a lower guidance for the financial year ending March 2013 (FY13) as well. For FY13, the management expects sales to grow by 13.9%-16.0% YoY and Earnings per Share (EPS) to grow by 9.1%-10.9% YoY. However, in US dollar terms, the company expects just 8%-10% YoY growth in revenues for FY13.
  • Infosys has proposed a final dividend of Rs 32 per share, including a special dividend of Rs 10 per share. The special dividend is on account of completion of 10 years of Infosys BPO operations (yield of 1.3%). Including this total dividend for the year would be Rs 47 per share (yield of 2.0%)

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