Infosys declared its fourth quarter result yesterday. The results came in line with the street expectations. Sales were around 1% above the Bloomberg consensus estimate, whereas the net profit was almost same as per the street estimates. Despite the fact the numbers are in-line with the street expectations; the disappointment is on the rupee guidance front, however the dollar guidance is positive.

Result highlights:

  • The consolidated net sales for the quarter ended March 10 was up by 5% to Rs. 5,944 cr, this was mainly on account of recovery the Financial Services Sector
  • Company’s net profit on a consolidated basis contracted by around 1% to a level of Rs. 1,600 cr, this is mainly on account of a higher tax out go. Since the company has provided a branch profit tax of Rs 232 cr for its overseas branches
  • Company’s operating margin remained fairly stable around 30.10% on account of increased utilizations
  • Company’s diluted EPS fell by around 1%, to Rs. 28. / share from Rs 28.29/share, a year ago
  • The company recruited 27639 employees in FY10 and has made 19000 campus offers for FY11
  • Its USD 200 million plus client was down from 2 in Q3 to 1 in Q4. Top 5 client’s contribution was down from 17.6% to 15.8% in Q4 versus Q3
  • Dollar Guidance:
    • In dollar terms, the company expects 16-18% growth in revenues for the next year i.e. FY11. It expects revenues at USD 5.57-5.67 billion
    • EPS growth at 4.3-8.6% for the next financial year
  • Rupee Guidance:
    • In rupee terms, company lowered its guidance for FY11. It expects EPS at Rs 106.82-111.28 per share and revenue growth of 9-11%

 I strongly believe that despite the fact the Infosys results and the guidance are muted the Indian IT sector will see out performance in the Indian equity markets as, due to expected rate hike by RBI, funds will start moving from rate sensitive sectors to rate defensive sectors.

Author name:Rahul Sonthalia, Research Head, Kredent