Infosys targets industry growth to join peers, no change in guidance

Bangalore, July 11 (IANS) Global software major Infosys Ltd. is bracing up to grow at the industry level and catch up with peers, a top official said Friday.

"Our focus is to grow on par with the industry and compete with peers, as the overall business environment remains largely stable," outgoing chief executive S.D. Shibulal told IANS here.

As a representative body of the Indian IT industry, Nasscom has projected 13-15 percent growth rate for fiscal 2014-15 as against 13 percent in 2013-14. Infosys, however, retained its revenue guidance at seven-nine percent for this fiscal as projected in April.

"Many of the challenges we faced externally and internally during the last three years are behind us and we have emerged stronger for steady growth in the ensuing quarters," Shibulal said.

Admitting that the company could not grow in line with the industry due to internal problems, which were Infosys specific, the co-founder said due to inadequate visas, they had to hire more locals and sub-contract projects for execution, impacting margins and operational costs.

"We are not happy with our performance during the last two years. We have gone through a tough time due to our specific challenges," Shibulal said.

"We have laid a strong foundation for accelerating growth by the new management led by Vishal (Sikka)," he added.

The chief executive-designate will join the company Aug 1.

The external challengers were the economic crisis, slowdown in the US economy and sluggish growth in Europe over the past three years.

The company also faced lawsuits over visa issues and a couple of employees based in the US.

The company retained guidance for this fiscal at 7-9 percent in dollar terms, as there has been no change in its business environment during the quarter.

In rupee terms, the consolidated revenue is expected to grow 5.6-7.6 percent year-on-year (YoY).

Demand environment, however, remained stable, as evident from five large multi-year deals the company closed in first quarter (April-June) of 2014-15, with a combined value of $700 million and added 61 clients.

"We see positive trends in our large deal wins during the quarter. We believe that this momentum will hold us in good stead as we focus on increasing volumes," chief operating officer U.B. Pravin Rao said in a statement later.

The company, earlier in the day, reported net profit of Rs.2,866 crore for the first quarter, registering 21.6 percent year-on-year (YoY) though it was 3.5 percent lower sequentially.

In a regulatory filing to the Bombay Stock Exchange (BSE), the company said its consolidated income for the quarter increased 13.3 percent YoY to Rs.12,770 crore, which is 0.8 percent less sequentially.

Under the International Financial Reporting Standard (IFRS), net income rose 15.3 percent YoY to $482 million and gross revenue 7.1 percent YoY to $2.13 billion.

The company has discontinued giving quarterly guidance since a year.

"We continue to enjoy the confidence of our clients by demonstrating superior execution capability and value realization," Shibulal said.

Operating margin improved to 25.1 percent from 23.5 percent year ago, as the utilisation rate increased to 80.01 percent from 76.7 percent quarter ago and 74.3 percent year ago despite impact of wage hike and rupee appreciation.

"We improved operational performance as a result of our cost optimisation initiatives and a focus on increasing productivity and utilisation, which partially offset the impact of compensation increases for our employees in the quarter," chief financial officer Rajiv Bansal said.

Though the company added 11,506 people during the quarter under review, net addition was only 879, as 10,627 left, increasing the attrition rate to 19.5 percent YoY from 16.9 percent year ago and 18.7 percent quarter ago.

"Our attrition rate is a matter of concern as it remained high though it also reflects the high demand environment for our workforce," Shibulal observed.

With 879 new people joining, the company's total number of employees has gone up to 161,284.

"We have made offers for 22,000 freshers in campuses across the country for this fiscal and will absorb them in phases as our recruitment is based on business environment," Shibulal added.