Infy posts 109% rise in Net, Sales - Views on News from Equitymaster

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Infy posts 109% rise in Net, Sales

Jul 11, 2000

Infosys Technologies Ltd. has posted a YoY 109% jump in its revenues to Rs 3.6 bn in 1QFY01 led by strong growth rate in both domestic and exports revenues. The profit before extraordinary income skyrocketed to Rs 1.2 bn witnessing a rise of 100%. During the quarter the company's e-business engagements contributed 28.7% of total revenues (18.8% in 1QFY00), start-up companies accounted 10.9% (8% in 1QFY00) and the balance is from software services and products. The company continues to expand its client base and has added 32 new clients during this quarter.

Infosys has been able to improve its operating profit margins by 1% to 38.7%. The rise in the expenditure was led by 131% increase in the staff cost.

The company's performance in the current quarter as compared to the quarter ending March 2000, however raises some questions regarding the sustainability of its operating margins. Indeed there has been a marginal deterioration of 0.2% in operating margins during this period. This is largely due to a faster growth in staff costs. Although a two quarter period is short to draw a trend, it nevertheless brings to light a potential problem area for software companies.

(Rs m) 1QFY00 1QFY01 Change
Sales 1,703 3,555 108.8%
Other Income 138 151 9.6%
Expenditure 1,061 2,179 105.3%
Operating Profit (EBDIT) 641 1,377 114.6%
Operating Profit Margin (%) 37.7% 38.7%  
Interest - -  
Depreciation 93 177 90.3%
Profit before Tax 686 1,350 96.8%
Other Adjustments 0 55  
Tax 80 137 71.4%
Profit after Tax/(Loss) 606 1,268 109.2%
Net profit margin (%) 35.6% 35.7%  
Diluted EPS 36.7 76.8  
(annualised)      

The other income of the company is mainly from exchange differences on translation of foreign currency deposits kept abroad. During the year Infosys transferred its intellectual property rights in Onscan (a web focussed wireless enabled notification product) to Onscan Inc., US. The product was transferred for a gross consideration of US$ 2 m. The income out of the transfer of Rs 54.9 m is treated at extraordinary item.

Infosys has launched its new product 'Finacle' an integrated core banking solutions. The product is positioned as a core banking e-platform bringing a paradigm shift in the way banking is conducted by leveraging on the Internet technology. It enables banks to offer products and services through ATMs, call centres, telephones and the Internet.

At the current market price of Rs 8,450, Infosys is trading at a PER of 110 times its 1QFY00 annualised earnings. In the past the company has P/E ratio in the range of 120-140. The company will be able to maintain its premium valuations due to its ability to grow both organically and inorganically.


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