Infosys Q1: Net down 6% QoQ at Rs 1,079cr

Infosys Technologies, India's second largest software exporter, has under-delivered on its own usually conservative guidance by almost 4%.

The strong appreciation of the rupee during the past quarter against global currencies, specificially the US dollar, has taken its toll on the software bellwether.

Though the company has recorded a 35% and 25% increase in net profit and topline on a year-on-year basis, the bottomline has dipped, sequentially, by close to 6%. The topline, however, has remained stagnant. While YoY operating profit has moved up by close to 22%, it has dropped by almost 10% sequentially.

Net profit for the first quarter of FY08 at Rs 1,079 crore includes a reversal of tax provisions amounting to Rs 51 crore. The company, which might find it hard to add another billion during the year, has posted a 25% YoY increase in topline to Rs 3,773 crore.

CEO & MD S Gopalakrishnan, however, put up a brave face and said: "As clients recognise the strategic imperative of global sourcing in an increasingly flat business world, the demand for large end-to-end players like Infosys continues to be strong. We continue to focus on being a partner of choice to our customers."

The company, which usually sets the trend for the software services industry in India, has added that rupee appreciation will indeed take a toll on its bottomline and has revised its guidance downwards. The dollar guidance has, however, been revised upwards.

Infosys has guided the markets that during the second quarter of the current fiscal, its topline, in rupee terms, will grow by around 15%, while it will move up in the range of around 18% during the entire fiscal.

This is a telling story on how the Indian exporters are caught in a whirlwind of the appreciating rupee - given the fact that Infosys has been growing its topline by at least 30% over the past few quarters.

In dollar terms, the topline for the entire year is expected to grow around 30% just kissing the $4 billion mark, while for the second quarter, it will grow by a little over 30%.

Said V Balakrishnan, CFO, Infosys: "The sharp appreciation of the rupee against all major currencies impacted our operating margins during the quarter. However, our robust and flexible operating and financial model enabled us to maintain our net margins while absorbing the impact of appreciating currency, higher wages and visa costs."

Infosys added 35 new clients during the first quarter, and increased its employee base to almost 76,000. While there was a gross addition of 7,004 employees, net addition was only at 3,730 as Infosys BPO saw heavy attrition.