Infosys beats St ahead of new CEO takeover

Net profit rises 22% year on year on new order wins; co retains 7-9% revenue growth guidance

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Infosys Ltd posted first-quarter profit that beat analyst estimates as India's second-largest software services company won more orders.

Net profit rose 22% to Rs 2,890 crore in the three months ended June from Rs 2,370 crore a year earlier, Infosys said.

Net profit, however, was down 3.5% over the preceding January-March quarter.

Revenue climbed 13% to Rs 12,770 crore year on year. In dollar terms revenue grew 2% to 2.1 billion quarter on quarter.

Operating profit margin widened to 25.1% in the quarter, compared with 23.6% in the year earlier period, according to data. Utilisation level stood at 74.7%.

In this backdrop, Infosys retained its revenue growth guidance in the range of 7-9%.

"We believe that this is the right guidance for us this time around. Our guidance is based on many factors, which included our clients' views as well."

S D Shibulal, outgoing chief executive officer and managing director, termed the quarter as good for the company. "The quarter has been good for us. We have added 61 new clients and we continue to enjoy their confidence by demonstrating superior execution capability and value realisation," he said, adding the company was in a much better position now than a year ago.

"For the last year or so we have not been too happy with our performance. Our aspiration is always to have a superior average performance. Growth has always been our top priority and I must admit we have gone through some tough time," he said, adding most of the challenges the company faced were internal and not external.

"Employee retaliation, moving from Infosys 2.0 to Infosys 3.0, attrition were some of the issue plaguing us. However, now we have left behind those issues."

The results were in line with analyst expectations.

"The results were largely in line with our estimates. The surprise during the quarter was less than expected contraction in EBIT margin despite wage hike and visa related costs. This illustrates that the cost optimisation initiatives taken up earlier have started yielding results," said Daljeet S Kohli, head of research IndiaNivesh Securities.

Hitesh Shah, director research, IDFC Securities said he expects a positive reaction from stock. "However, near-term upside would be limited given in-line revenues. Markets would wait for signals about any change in strategy/ execution post new CEO," he said.

Sanchit Gogia, chief analyst & CEO, Greyhound Research, said Infosys is all set to undergo a transformation shift in its DNA "from a pure play system to a firm with an increasing focus on software assets and intellectual property".

"The new CEO Vishal Sikka has an important role to play and we are closely watching the next steps Infosys will take under his leadership," said Gogia.

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