Infosys Profit Beats Estimates After Orders Increase

By Ketaki Gokhale and Shikhar Balwani - Oct 12, 2011

Infosys Ltd., India’s second-largest software exporter, reported second-quarter profit that beat analysts’ estimates as customers raised spending on outsourcing.

Net income rose 9.8 percent to 19.1 billion rupees ($387 million) in the three months ended Sept. 30, or 33.36 rupees a share, from 17.4 billion rupees, or 30.40 rupees, a year earlier, Infosys said in a statement today. That compares with the 18.7 billion rupee median of 35 analysts’ estimates compiled by Bloomberg.

Infosys shares rose the most in a month, leading stocks of Tata Consultancy Services Ltd. (TCS) and Wipro Ltd. (WPRO) higher, after earnings beat expectations for the first time in a year and the company raised full year sales guidance. The Bangalore-based code writer joins Accenture Plc (ACN) in reporting profit that exceeded estimates, as outsourcing demand remains buoyant.

“The dollar revenue outlook for the third quarter and the rupee guidance for the full year are positive,” Rohit Kumar Anand, an analyst at PINC Infinity.com Financial Services Ltd. said by phone. “Expectations were muted, and given that, the markets should react positively to these outlook numbers.”

The shares rose as much as 5.6 percent to 2,644 rupees, the biggest intraday gain since Sept. 14. It changed hands up 4.9 percent as of 9:21 a.m. in Mumbai trading.
Forecast Raised

Sales in the third quarter may range between $1.80 billion and $1.84 billion, Infosys said in the statement. Sales in the year ending in March may range between $7.08 billion and $7.2 billion, compared with a July forecast for as much as $7.3 billion, it said.

Infosys raised the full year sales guidance in rupee terms to between 335 billion rupees and 340.9 billion rupees from an earlier forecast for between 317.8 billion rupees and 323.1 billion rupees.

“The rupee guidance number for the full year seems to be a pretty strong one,” Sanjeev Prasad, an analyst at Kotak Institutional Equities, told Bloomberg UTV today. “A percentage point change in the dollar guidance doesn’t really mean that the world has changed. A 17 percent to 19 percent growth is still a pretty decent number.”

The Indian code-writer renewed an outsourcing contract with Alcoa Inc. for five more years, and sold its banking software to Philippines-based City Saving Bank.

Revenue in the second quarter totaled 81 billion rupees compared with 69.5 billion rupees a year earlier, Infosys said. The company will pay an interim dividend of 15 rupees a share.

“Some companies are hiking their IT budgets for 2012, and by a substantial number, at that,” said Pralay Kumar Das, an analyst with Elara Securities India Pvt. in Mumbai. He has an “accumulate” rating on Infosys stock. “The American incumbent IT players are doing very well, and in fact are raising their guidance. If there’s no reason for them to say demand in Europe and U.S. is falling off, then I don’t see why it should be the case for Indian vendors.”

To contact the reporters on this story: Ketaki Gokhale in Mumbai kgokhale@bloomberg.net; Shikhar Balwani in Mumbai at sbalwani@bloomberg.net

To contact the editor responsible for this story: Michael Tighe at mtighe4@bloomberg.net
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