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Infosys: Continued fall in operating margin
Oct 12, 2012

Infosys Ltd. announced its second quarter results for the financial year 2012-2013 (2QFY13) today. The company reported a 2.5% quarter-on-quarter (QoQ) growth in its sales and a 3.5% QoQ growth in its net profit. Here is our analysis of the results.

Performance summary
  • Sales grew by 2.5% QoQ in rupee terms during 1QFY13. The growth figure was very similar, 2.6% in USD terms. Thus the rupee depreciation effect witnessed during the first quarter seems to be fading out. This is confirmed by the constant currency quarter-on-quarter growth of 2.4%.
  • Volume growth was 3.8% QoQ as compared to 2.7% in the last quarter.
  • Operating margins declined by 1.7% QoQ to 26.3% during the quarter as compared to 28% recorded in the previous quarter (1QFY13). This was attributable to the rise in cost of sales as well as in selling and marketing related expenses.
  • Other Income grew by 48% QoQ and included a USD 25 mln exchange gain. This mitigated the negative growth of 3.6%QoQ in operating profits (on an absolute basis).
  • As a result profit after tax grew by 3.5% QoQ. Growth would have been higher if not for the increase in tax rates. Effective tax rate increased by 0.5% QoQ to 28.3% in 2QFY13.
  • The company added 39 new clients on a gross basis during the quarter taking the total number of active clients to 715.
  • The company has declared an interim dividend of Rs 15 per share (dividend yield of 0.6%)

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