• APRIL 11, 2001

History created: Infy disappoints

Infosys has created a history by reporting lower than expected topline and profits growth in the fourth quarter of the year ended March '01. The company's revenues and profits for the quarter increased by 5% and 9% respectively.

(Rs m) 3QFY01 4QFY01 Change FY00 FY01 Change
Sales 5,371 5618.7 4.6% 8,823 19,006 115.4%
Other Income 145 102 -29.4% 391 594 51.8%
Expenditure 3,196 3,308 3.5% 5,357 11,510 114.9%
Operating Profit (EBDIT) 2,175 2,311 6.3% 3,466 7,496 116.3%
Operating Profit Margin (%) 40.5% 41.1%   39.3% 39.4%  
Interest - -   -    
Depreciation 330 379 14.8% 532 1,129 112.2%
Profit before Tax 1,989 2,034 2.3% 3,325 6,960 109.3%
Tax 195 218 11.5% 397 727 83.1%
Provision and contingencies loss/(income) 131 -   (7) (55)  
Profit after Tax/(Loss) 1,663 1,817 9.2% 2,935 6,288 114.2%
Net profit margin (%) 31.0% 32.3%   33.3% 33.1%  
Profit after Tax/(Loss)# 1,794 1,817 1.3% 2,928 6,233 112.9%
Net profit margin (%)# 33.4% 32.3%   33.2% 32.8%  
Diluted number of shares 66.1 66.1 -0.1% 66 66  
Diluted Earnings per share* 100.6 109.9   44 94 112.9%
P/E (x)   30.2     35.2  
# Excl extraordinary write off
In FY00, Provisions for contingencies and e-inventing the company are not included while calculating operating profits

However, remarkably Infosys has improved its operating margins by over 60 basis points to 41.1% in 4QFY01. Compared to previous year, the company's OPM are up by 16 basis points. This is on the back of improvement in offshore revenues due to a slowdown in the US economy (Infosys derives major portion of its revenues from the US markets).

During the year, Infosys made number of strategic investments. It has invested Rs 23 m in Purple Yogi Inc, USA, Rs 18 m in M-commerce Venture Pte Ltd, Singapore, Rs 22 m in Alpha Thinx, Australia, Rs 68 m in Asia Net Media (BVI) Ltd. and Rs 134 m in CII Corp., USA. Infosys has written off its investments in EC Cubed Inc. and Alpha Thinx as these companies have filed for liquidation.

At the current market price of Rs 3,320 Infosys is trading at a P/E of 35 times FY01 earnings. The company's performance in the current quarter is lower than expected. We had projected a sequential (QoQ) growth of 18% and 26% in revenues and net profits respectively. Infosys topline growth has witnessed a significant slowdown in the fourth quarter.

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