Infosys Q2 net profit leaps 48.64%

Beating its own and market expectations, software major Infosys Technologies on Tuesday reported a 48.64 per cent jump in net profit at Rs 447.37 crore (Rs 4.473 billion) for the second quarter ended September 30, 2004, over Rs 300.98 crore (Rs 3.009 billion) posted in the corresponding period last year.

The Bangalore-based Infosys reported revenues of Rs 1,749.33 crore (Rs 17.493 billion) for the period between July to September, an increase of 51.88 per cent over Rs 1,151.80 crore (Rs 11.518 billion) during the same period last year.

The company also revised its revenue outlook for the year from Rs 7,132 crore (Rs 71.32 billion) to Rs 7,160 crore (Rs 71.60 billion).

Highlights:

• Income was Rs 1,749.33 crore for the second quarter ended September 30, 2004, an increase of 51.88% over the comparable income for the corresponding quarter in the previous year.
• Net profit after tax was Rs 447.37 crore for the second quarter ended September 30, 2004, an increase of 48.64% over the comparable net profit for the corresponding quarter in the previous year.
• Earnings per share from ordinary activities increased to Rs 16.71 from Rs 11.36* for the corresponding quarter in the previous year, an increase of 47.10%.
• Interim dividend of Rs 5.00 per share (100% on an equity share of par value of Rs 5 each) as compared to Rs 3.63* (72.50% on an equity share of par value of Rs 5 each) for the corresponding period in the previous year. (* adjusted for the 3:1 bonus issue of shares distributed on July 6, 2004).

Others

• 32 new clients were added during the quarter.
• Net addition of 5,010 employees for the quarter.
• 32,949 employees as on September 30, 2004.

Business outlook

"Offshoring has become a mega trend in the industry, as more customers leverage their partnership with Infosys to increase their global competitiveness," said Nandan M. Nilekani, CEO, President and Managing Director.

"We continue to focus on scalability, which is the key to rapid growth, and on differentiation, which is the key to higher client value," he added.

The company's outlook (consolidated) for the quarter ending December 31, 2004 and the fiscal year ending March 31, 2005, under Indian GAAP and US GAAP, is as follows:

Under Indian GAAP - consolidated

• Outlook for the quarter ending December 31, 2004*.
• Income is expected to be in the range of Rs 1,869 crore and Rs 1,882 crore; YoY growth of 49% to 50%.
• Earnings per share is expected to be Rs 17.10; YoY growth of 38%.

Outlook for the fiscal year ending March 31, 2005*

• Income is expected to be in the range of Rs 7,132 crore and Rs 7,160 crore; growth of 47% to 48%
• Earnings per share is expected to be Rs 67.00; growth of 43% (* conversion 1 US$ = Rs 45.91)

Under US GAAP

• Outlook for the quarter ending December 31, 2004
• Consolidated net revenues is expected to be in the range of $ 407 million to $ 410 million; YoY growth of 48% to 49%.
• Consolidated earnings per American Depositary Share is expected to be $ 0.38; YoY growth of 41%.

Outlook for the fiscal year ending March 31, 2005

• Consolidated net revenues is expected to be in the range of $ 1,555 million to $ 1,561 million; growth of 46% to 47%.
• Consolidated earnings per American Depositary Share is expected to be $ 1.46; growth of 42%.

"We have scaled up our recruitment, education and leadership development infrastructure to meet

the growing business needs," said S Gopalakrishnan, COO. "This quarter, we hired 5,010 net employees for the group."

Interim dividend

The company has declared an interim dividend of Rs 5.00 per share (100% on an equity share of par value of Rs 5 each) at the board meeting held on Tuesday. An interim dividend of Rs 3.63* (72.50% on an equity share of par value of Rs 5 each) was declared for the corresponding period in the previous year.

The record date for payment of dividend will be October 19, 2004. (* adjusted for the 3:1 bonus issue of shares distributed on July 6, 2004).

Expansion of services and significant projects

Infosys and its subsidiaries added 32 clients during the quarter. The company continued to provide the assurance of Infosys predictability to global corporations, assisting them in improving their competitiveness.

Infosys' business solutions continued to make clients in the Retail industry more efficient and competitive.

A leading discount retailer in the US has selected Infosys as a preferred provider of IT consulting for a strategic sourcing initiative. Additionally, a major European Retailer chose Infosys to implement an RFID solution. This solution enables the retailer to achieve faster throughput and high visibility in Retail Supply Chain processes.

Large corporations in the Automotive and Aerospace industry are increasingly using the Infosyspioneered Global Delivery Model to improve efficiency. A premier UK-based Aerospace services company chose Infosys' services for a design and analysis project of an aircraft sub-system.

A wellknown player in the European auto industry also started working with Infosys for a design and analysis project.

Energy and Utilities companies are also leveraging the power of technology in increasing customer focus.

A Fortune 500 company in the US chose Infosys to provide application development and maintenance services in the area of customer relationship management. A large utility company is using Infosys' expertise in rewriting its customer information systems.

One of the top 10 technology companies in the world, and one of the largest companies in the IT storage space are partnering with Infosys for the development of a storage management product.

Infosys' relationship with large telecom players continued, with the addition of one of the largest wholesale telecom carriers in Europe to its client portfolio. Infosys is engaged in a critical assignment to re-architect the account management portal of a large US-based carrier providing voice and data services.

The company has also started providing Oracle application support to another premier communications service provider in the US.

Infosys strengthened its presence in the financial and insurance industries with the addition of a German multi-billion euro insurance organization. Infosys was selected to help in replacing an existing hierarchical database, and thereby achieve organization-wide uniformity and reduced licensing costs.

A company providing proxy voting and corporate governance solutions to its global client base selected Infosys to provide business consulting services.

Infosys started working with a pan-European government organization in the deployment of payroll and financial solutions.

"Sourcing strategically from service providers has become the outsourcing approach for many companies, and we see this trend across all industries," said Basab Pradhan, Head - World-wide Sales and Senior Vice President. "Our strong leadership in technology and sourcing solutions, combined with our excellence in execution, is helping our clients meet their objectives effectively."

"The total volume growth during the quarter was 12.60%, with offshore volume growing more rapidly, at 15.30%," said S D Shibulal, Member of the Board and Head - World-wide Customer Delivery.

"Investments in the various plans of our business units, supported by robust business platforms, have started yielding results, and are contributing to the growth momentum."

Banking products

The sale of the Finacler suite of products made significant headway during the quarter. Union Bank of the Philippines (UBP), one of the top 10 banks in Philippines, has licensed Finacler core banking and e-banking solutions.

This win marks a key breakthrough for Finacler in the core banking space in South East Asia. IDBI Ltd. has chosen to deploy Finacler as the bank's core banking platform across 101 locations, by March 2005. UTI Bank, an existing customer, chose Finacler treasury solution making it Finacle's first win in the treasury solution space in India.

Additionally, a leading private sector bank in India licensed Finacler wealth management solution and Finacler CRM solutions during the quarter.

Liquidity and capital expenditure

Cash and cash equivalents, including investments in liquid mutual funds, increased by Rs 350.05 crore during the quarter, from Rs 2,152.02 crore to Rs 2,502.07 crore, after incurring capital expenditure of Rs. 176.06 crore.

"Pricing has been stable. Our expense management model has demonstrated flexibility in absorbing the cost of recruiting 5,010 net employees while maintaining margins," said T V Mohandas Pai, Chief Financial Officer. "We have spent Rs 176.06 crore on capital expenditure during the quarter, and we have about 3.5 million sq. ft. of infrastructure under construction."

Update on Infosys Technologies (Shanghai) Co. Ltd

Infosys Technologies (Shanghai) Company Limited has appointed James Lin as the Chief Executive Officer. James has over 20 years experience in the software industry. He has been the Client Solution Principal for IBM Global Services in China and prior to that, he was with Tandem Computers in California for over a decade. James holds a master's degree in Computer Science.

Accolades

Infosys has won the 2004 Annual Asian Most Admired Knowledge Enterprise (MAKE) award. A panel of Asian Fortune Global 500 business executives and leading knowledge management experts chose the 2004 Asian MAKE winners. Only organizations founded and headquartered in Asia were eligible for this MAKE study.

The expert panel rated organizations against the MAKE framework of eight key knowledge performance dimensions that are the visible drivers of competitive advantage.

In a survey conducted by CLSA, Infosys has been voted as having the highest corporate governance score amongst all the Asian large-cap corporations (excluding Japan).

The survey covered the corporate governance developments across 450 companies in the Asian (excluding Japan) markets. Infosys had a score of 87% as against an average of 81% for the top ten corporations.

According to the report, Infosys continues to be the highest scorer in India and the Asia Pacific, having essentially maintained its top ranking since 2001. The company has continued to stay a step ahead of the prevailing corporate governance norms and has implemented most of the reforms before these became mandatory.