Infosys Q3 net up 33%, gives guidance shock

Sits On 20K Cr Cash, Seeks Growth Without Compromising Margins | Stock Tanks 8%

TIMES NEWS NETWORK 

Bangalore: IT major Infosys posted a revenue of Rs 9,298 crore —up 31% over the previous year and 15% over the previous quarter —for the third quarter of this fiscal. Net profit at Rs 2,372 crore was 33% higher over the previous year and 24% over the previous quarter. The results were better than the company's revenue guidance of Rs 8,826-9,012 crore for the third quarter. 
    However, the strong rupee revenue numbers were a result of the depreciating rupee, which fell 11% in the October-December quarter. In dollar terms, the company posted revenues worth $1,806 million, a growth of 14% over the previous year and 3.4% over the previous quarter. The big negative which weighed over the good Q3 numbers was the company giving zero to marginal revenue growth guidance for Q4, at between $1,806 million and $1,810 million. 
    This disappointed the street as IT stocks were the worst losers with the BSE IT index falling 5.96%. Topping the losers was Infosys, which was down 8.4% at Rs 2,588.60, followed by TCS down 3.89 % at Rs.1,092.90 and Wipro down 2.6 % at Rs.391. 
    On the operating margin front, the company outperformed this quarter with EBIT margin growing by three percentage points sequentially (from Q2 to Q3) to 31.7%. According to CFO V Balakrishnan, the company also saw a marginal improvement in pricing due to a shift towards high-value services. The company said, as of Dec 31, 2011, its cash and cash-equivalents stood at Rs 19,752 crore. Most analysts agree that Infosys is being very conservative with its money. While global technology firms like IBM and Dell have time and again used the inorganic route to grow rapidly, Infosys has not sufficiently used its Rs 20,000 crore worth of cash reserves for large M&As. 
    Though it recently acquired Australian BPO firm Portland Group for close to Rs 200 crore, analysts feel that larger and more strategic buys are vital for the company to accelerate growth.