Infosys Q2 net surges 9.8%; shares tank 5% on guidance cut

Bengaluru: Infosys, India's second-biggest software exporter, reported a 9.8 percent rise in September quarter consolidated net profit today but trimmed its sales growth forecast for the current fiscal on dollar woes.

The company also said its Chief Financial Officer Rajiv Bansal has resigned.

Consolidated net profit in July-September rose to Rs 3,398 crore compared with Rs 3,096 crore in the year-ago period, the company said in a statement.

Revenue was up 17.2 percent to Rs 15,635 crore in the second quarter ending September 30 from Rs 13,342 crore in the year-ago period.

Infosys shares briefly rose to a record-high before reversing course and losing as much as 5 percent. At 1200 hrs, they were down 2.5 percent at Rs 1,138.

"(Deal) pipeline looks good. We had total contract value (TCV) wins of close to USD 1 billion that is the largest ever... We have had great progress. However, it is still early in our journey, we are making great progress on our 'new and renew' strategy. All in all, it is a good and encouraging quarter," Infosys CEO and MD Vishal Sikka said.

For the full fiscal, Infosys said revenue in dollar terms is likely to grow 6.4 percent to 8.4 percent, lower than previous guidance of 7.2 to 9.2 percent, as broad weakness in IT spending and a stronger dollar are making clients wary.

While the company did not give reasons for the cut in growth forecast, the appreciation of the dollar against major currencies is said to be the main cause.

On a constant currency basis, guidance was unchanged.

Lesser number of working days and furloughs, especially in sectors like insurance and retail, could have an impact on the performance of Infosys in the second half of the year, Infosys Chief Operating Officer U B Pravin Rao said.

"Historically, for the industry the second half growth has been relatively lower when compared with the first half. Q3 you typically have lower working days, furloughs... For us, Q4 has also been challenging for us in the last couple of years," he added.

Rao said this time, particularly in the October-December quarter, the company expects to see these factors in other sectors as well.

"Apart from the traditional furloughs in industries like manufacturing, which we have already factored in, this time we are also anticipating furloughs impact to be much larger in couple of other industries as well which historically we would not have seen in the past and there are are certain client specific things as well," he said.

So, based on the visibility, the second half would be challenging, he added.

Without giving reasons, Infosys said Bansal, at the end of the of the day, will be replaced by M D Ranganath, who is currently head of strategic operations, in charge of risk management, strategy and mergers and acquisitions.

"The impact of significant currency volatility was effectively mitigated by our proactive hedging programme," Bansal said.

North America accounted for 63.3 percent of the company's revenues, while Europe, India and Rest of the World regions contributed 22.9 percent, 2.3 percent and 11.5 percent, respectively.

During the July-September quarter, Infosys and its subsidiaries added 82 clients.

The company added 8,453 employees in the said period from June 2015 quarter, taking its total headcount to 1,87,976 as of September 30, 2015.

The company's attrition level was at 19.9 percent in the said quarter compared with 19.2 percent in the June quarter and 24.8 percent in the year-ago period.

The company declared an interim dividend of Rs 10 per equity share.

Liquid assets including cash and cash equivalents, available-for-sale financial assets and government bonds were Rs 32,099 crore as on September 30, 2015.

The Board has also approved the 2015 Incentive Compensation Plan, amending the existing 2011 RSU Plan.

"The Board further approved the issuance of new shares, so as not to cumulatively exceed 2 percent of the shares outstanding, in order to support grants made over time under the 2015 Incentive Compensation Plan," it said.

Approval to issue such shares under the 2015 Incentive Compensation plan will be subject to the approval of shareholders, it added.