Sign up for Equitymaster's free daily newsletter, The 5 Minute WrapUp and get access to our latest Multibagger guide (2017 Edition) on picking money-making stocks.

This is an entirely free service. No payments are to be made.

Download Now Subscribe to our free daily e-letter, The 5 Minute WrapUp and get this complimentary report.
We hate spam as much as you do. Check out our Privacy Policy and Terms Of Use.
Infosys: Performance speaks - Views on News from Equitymaster
  • E-MAIL
  • A  A  A
  • Oct 10, 2003

    Infosys: Performance speaks

    At one more instance of performing more that what it had promised, Infosys has presented robust results for 2QFY04. The company has reported a sequential growth of 5% and 8% in its topline and bottomline respectively.

    Domain presence: Increased financial and telecom revenues…
      1QFY04 2QFY04  
      Rs m % of total Rs m % of total Change
    BFSI 4,047 37.4% 4,414 38.9% 9.1%
    Manufacturing 1,688 15.6% 1,623 15.0% -3.8%
    Retail 1,255 11.6% 1,266 11.7% 0.9%
    Telecom 1,580 14.6% 1,666 15.4% 5.5%
    Energy & Utilities 379 3.5% 325 3.0% -14.3%
    Transportation & logistics 768 7.1% 768 7.1% 0.0%
    Others 1,104 10.2% 963 8.9% -12.7%
    Total revenues 10,820 100.0% 11,348 100.0% 4.9%

    On the revenues front, growth was mainly brought about by maintenance & testing services and financial & telecom services. On the telecom front, the company had recently won a five-year US$ 50 m contract from Telstra, the Australian telecom major for the purpose of providing software development and maintenance services. Notably, the company witnessed a decline in revenues from high-end services like package implementation and consulting, though this does not signify a trend. Also, revenues from software development declined owing to lower discretionary expenditure by the company’s clients. Infosys has been witnessing pressure on this (development) front due to the fact that its clients globally have reduced spending on new software development.

    On the expenditure front…
    (Rs m) 1QFY04 2QFY04 Change
    Employee expenses 5,370 5,673 5.6%
    % of sales 49.6% 50.0%  
    Selling and marketing expenses 797 804 0.9%
    % of sales 7.4% 7.1%  
    General and administration expenses 812 887 9.3%
    % of sales 7.5% 7.8%  

    Stabilizing billing rates and initiatives on the costs front has helped the company improve its operating margins for the September quarter by 110 basis points. Also, a continued shift offshore has helped the company in paring effects of rising (as percentage of revenues) expenditure levels on the employee and general and administrative fronts. The rise in employee costs is mainly due to addition of 2,205 employees in 2QFY04. This takes the totals strength of employees at Infosys at 19,120. The management plans to hire 3,000 more people in the next two quarters. As a part of its initiatives, the company has been on a hiring spree in anticipation of increased demand from clients, both existing and new. While there still are no concrete signs of large deals flowing Infosys’ way, when that happens, the company would be in a comfortable position to cater to the increased demand.

    As for the business process management subsidiary, Progeon, revenues and profits have grown sequentially by 33% and 4% in 2QFY04. The operating margins for this unit have, however, remained constant at 7.6%. During the quarter, Progeon added 3 new clients and 156 employees to its list.

    There is too much ‘noise’ about increasing employee dissent in the company over the past few quarters. And the result has shown in increasing levels of attrition (see the chart above). But we believe this to be a short-term phenomenon as the company continues to ‘invest’ (and not spend) for growth as far as employees are concerned. Another concern regarding the appreciation of the rupee also seems short-term in nature, as the company has well hedged its receivables.

    In its view of improvement in Infosys’ performance, the management has raised its earnings guidance for FY04. From the earlier Rs 168, the EPS guidance has revised upwards to Rs 178, a gain of 24%. The raison d'être for this upgradation is based on the management’s faith that a greater stability is likely to be witnessed in the pricing environment and that volumes are likely to grow as large deals come Infosys’ way. Despite the fact that the stock has run up considerably since the company revised its earnings guidance in July, the management’s ability to take the company towards higher growth trajectory should soothe long-term investors.



    Equitymaster requests your view! Post a comment on "Infosys: Performance speaks". Click here!


    More Views on News

    Tech Mahindra: Our Revised View (Quarterly Results Update - Detailed)

    Aug 2, 2017

    A better than expected turnaround in performance results in a change in view.

    Wipro: A Decent Start to the Year (Quarterly Results Update - Detailed)

    Jul 27, 2017

    Digital services drive growth for Wipro in 1QFY18.

    Infosys: A Decent Start to FY18 (Quarterly Results Update - Detailed)

    Jul 14, 2017

    Infosys starts FY18 on an encouraging note with a stable performance.

    Ankit Shah's First Five Insider Recommendations (The 5 Minute Wrapup)

    Aug 5, 2017

    How to get exclusive insider recommendations from Ankit Shah.

    TCS: Currency Volatility Plays Spoilsport (Quarterly Results Update - Detailed)

    Jul 14, 2017

    TCS starts FY18 decently despite an adverse currency impact.

    More Views on News

    Most Popular

    Demonetisation Barely Made Any Difference to Tax Collections(Vivek Kaul's Diary)

    Aug 7, 2017

    The data tells us quite a different story from the one the government is trying to project.

    Proxy Plays: A Smart Way to Bet on 'Off Limits' Companies(The 5 Minute Wrapup)

    Aug 4, 2017

    The small-cap space is full of small players that are clear proxies to great growth stories and Indian megatrends.

    Should You Invest In Bharat-22 ETF? Know Here...(Outside View)

    Aug 8, 2017

    Bharat-22 is one of the most diverse ETFs offered so far by the Government. Know here if you should invest...

    Signs of Life in the India VIX(Daily Profit Hunter)

    Aug 12, 2017

    The India VIX is up 36% in the last week. Fear has gone up but is still low by historical standards.

    7 Financial Gifts For Your Sister This Raksha Bandhan(Outside View)

    Aug 7, 2017

    Raksha Bandhan signifies the brother-sister bond. Here are 7 thoughtful financial gifts for sisters...

    Copyright © Equitymaster Agora Research Private Limited. All rights reserved.
    Any act of copying, reproducing or distributing this newsletter whether wholly or in part, for any purpose without the permission of Equitymaster is strictly prohibited and shall be deemed to be copyright infringement.

    LEGAL DISCLAIMER: Equitymaster Agora Research Private Limited (hereinafter referred as 'Equitymaster') is an independent equity research Company. Equitymaster is not an Investment Adviser. Information herein should be regarded as a resource only and should be used at one's own risk. This is not an offer to sell or solicitation to buy any securities and Equitymaster will not be liable for any losses incurred or investment(s) made or decisions taken/or not taken based on the information provided herein. Information contained herein does not constitute investment advice or a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual subscribers. Before acting on any recommendation, subscribers should consider whether it is suitable for their particular circumstances and, if necessary, seek an independent professional advice. This is not directed for access or use by anyone in a country, especially, USA or Canada, where such use or access is unlawful or which may subject Equitymaster or its affiliates to any registration or licensing requirement. All content and information is provided on an 'As Is' basis by Equitymaster. Information herein is believed to be reliable but Equitymaster does not warrant its completeness or accuracy and expressly disclaims all warranties and conditions of any kind, whether express or implied. Equitymaster may hold shares in the company/ies discussed herein. As a condition to accessing Equitymaster content and website, you agree to our Terms and Conditions of Use, available here. The performance data quoted represents past performance and does not guarantee future results.

    SEBI (Research Analysts) Regulations 2014, Registration No. INH000000537.

    Equitymaster Agora Research Private Limited. 103, Regent Chambers, Above Status Restaurant, Nariman Point, Mumbai - 400 021. India.
    Telephone: +91-22-61434055. Fax: +91-22-22028550. Email: info@equitymaster.com. Website: www.equitymaster.com. CIN:U74999MH2007PTC175407

    Become A Smarter Investor In
    Just 5 Minutes

    Multibagger Stocks Guide 2017
    Get our special report, Multibagger Stocks Guide (2017 Edition) Now!
    We will never sell or rent your email id.
    Please read our Terms

    S&P BSE IT

    Aug 17, 2017 (Close)