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Infosys Q1 Net up 21.6%; attrition rate hits record 19.5%

Last Updated: Friday, July 11, 2014 - 22:10

Bangalore: IT major Infosys Friday reported a healthy 21.6 percent growth in consolidated net profit for the first quarter, helped by increase in business from Europe and improved operational efficiency.

S D Shibulal, CEO & MD Infosys, who will be succeeded by Vishal Sikka next month, said, "...I think we are leaving behind a stronger Infosys on which Vishal and Pravin Rao (newly appointed COO) and their team can actually capatilise- on the foundation that has been laid over the last 33 years, and on the foundation which has been strengthened over the last three years".

Driven by increase in business from Europe and improved operational efficiency, the city-based firm posted consolidated revenue increase of 13.3 percent to Rs 12,770 crore from Rs 11,267 crore in the same quarter of 2013-14.

The company had posted a net profit of Rs 2,374 crore in the year-ago period.

Announcing the results, Shibulal told reporters here that growth remains a priority for the firm.

For 2014-15, Infosys retained its conservative revenue guidance of 7-9 percent in USD terms and 5.6-7.6 percent in rupee terms, much below Nasscom's industry growth outlook at 13-15 percent in dollar terms.

He said: "We have not been happy with our own performance; we have not been satisfied with our own performance over the last two years. It is important for us to have a sustainable growth and industry standard growth".

"If you look at Infosys our aspiration is always superior financial performance....; so growth remains our top priority, and I'm sure that it remains top priority for Vishal and Pravin also," he added.

Infosys shares today closed one percent higher at Rs 3,325.80 on the BSE.

Shibulal, one among the co-founders of the company will step down as CEO & MD and from the Infosys Board on July 31, 2014 to pave the way for Sikka who has been inducted as a whole-time director of the Board and CEO & MD (Designate) on June 14 last.

Sikka will be the first non-founder chief and an outsider to take the top job at the company. 

Shibulal said, "we have gone through a time which was very challenging, because the challenges were not external alone, there were lot of internal challenges which were Infosys specific like - a challenge of investigation by justice department (in the US), challenge of employee retaliation...."

"At the same time, there were external challenges- the environment was tough, decision making was slow- we need to look at all this in a context. The most important thing is that all these challenges which were Infosys specific and internal has been put behind us," he added.

Shibulal said: "we have put a very strong foundation in place putting all this specific challenges behind us. Now growth has been a focus...".

Infosys' employee attrition hit a record high of 19.5 percent in the April-June quarter of 2014-15 fiscal from 16.9 percent in the year-ago period, signalling that the internal woes of the country's second largest IT services firm are not yet over.

The firm has witnessed a spate of exits of its top level executives since June last year when co-founder NR Narayana Murthy was called back from retirement to put the firm back on a growth trajectory.

Commenting on attrition, Infosys COO U B Pravin Rao said: "Employee attrition rates are worrisome and we are implementing various initiatives to retain good talent."

For 2014-15, Infosys retained its conservative revenue guidance of 7-9 percent in USD terms and 5.6-7.6 percent in rupee terms, much below Nasscom's industry growth outlook at 13-15 percent in dollar terms.

On guidance, Shibulal said "our guidance is Infosys guidance; it's a statement of fact."

To a question what next after the retirement, he said "ask me after August 1..."

Stating that he has been part of the industry for more than thirty three years, Shibulal said "....I clearly see a shift from data to information to insight into intelligence; today we are moving into area where we are looking at insight and intelligence...".

On skill mismatch, Shibulal said: "We have done several things to overcome this issue, including training our people. We have implemented new training in technologies where we are seeing growth. We are doing a lot of training to make sure that our people gain skills on multiple technologies. I believe that the issue is subsiding."

In US dollar terms, its consolidated net profit rose 15.3 percent to USD 482 million in the April-June quarter of this fiscal, while revenues rose 7.1 percent to USD 2.13 billion during the period.

However, on a sequential basis, Infosys' net profit dipped 3.5 percent from Rs 2,992 crore in January-March 2014 quarter, while revenues were lower by 0.8 percent from Rs 12,875 crore in the fourth quarter of FY'14.

Infosys added 11,506 employees (gross), taking its headcount to 1,61,284 employees as on June 30, 2014. Its attrition rate was, however, higher at 19.5 percent for the quarter.

Infosys had announced a wage hike of 6-7 percent for off-shore employees and 1-2 percent on-site employees.

Asked whether the current management structure at the Infosys with two Presidents is here to continue, Shibulal said it is a question for nominations committee and incoming management. The company needs to have an appropriate structure at the right point in time.

"Right now we have a structure which we are handing over to Vishal at some point it could change."

Pointing out that attrition continues to remain high, Shibulal said a number of steps had been taken to reduce it. They include improving predictability to employees by giving timely compensation increase and promotions, increasing variable payouts over the last few quarters, introducing a fast track carrier path for high performers.

"So we have done number of things to arrest attrition and we hope to see reduction in attrition as the result of these initiatives," he added.

To a question on fresh Jack Palmer case, Shibulal said "Palmer's current complaint to the department of labour is the repetition of the issues that were tried and dismissed by a Federal Court in 2012; ....We believe this is without merit and we expect the issue to be resolved at the earliest."

In 2012, Infosys had won a harassment case filed by its employee Jack Palmer in a US court alleging harassment and breach of contract after he raised concerns that the company may have violated immigration laws.

Palmer has filed a fresh case in May this year against Infosys alleging retaliation against him by denying him work, bonuses, promotions and terminating him.

First Published: Friday, July 11, 2014 - 11:15
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