Infosys puts up a stellar performance in Q1

Vishal Sikka's first year as Infosys CEO has ended with a bang. After tepid numbers in the March quarter, Infosys gave a blockbuster performance in the quarter ended June, beating street expectations and outdoing its biggest rival, TCS, on topline and volume growth. 

The results sent the company's share price soaring by 11% to Rs 1,112 on the Bombay Stock Exchange (BSE) on Tuesday. The intra-day 15% surge in Infosys' price added almost Rs 37,000 crore to the market cap of the company, which is perhaps the highest ever for a Sensex stock in a single session Stock Market Trading Tips

"This quarter saw the results of our deep operational focus as well as the widespread adoption of innovation and new technologies that is starting to show results now. While we are still early in our journey to become the next-generation services company, this gives us a good momentum for rest of the year," said Sikka, who took over as CEO on August 1 last year. 

Infosys' revenue grew 4.5% sequentially to $2.2 billion in the June quarter, the highest sequential growth in 15 quarters. TCS grew 3.5% in the same period. Infosys' volume of business grew 5.4% sequentially, the highest in 19 quarters, and higher than TCS' 4.8%. 

Infosys also raised its full-year revenue guidance in dollar terms to 7.2%-9.2% from its earlier forecast of 6.2%-8.2%. The company has, however, retained its guidance in constant currency at 10-%12% Himanshu Tiwari Astrologer

The $8.7-billion company's growth has been lagging that of peers like TCS, Cognizant and HCL Technologies by a big margin for several years now. But it now looks to be catching up. The constant currency guidance remains below the industry growth of 12%-14% that Nasscom has estimated for this year. Sikka has said he expects to touch industry average levels by the next financial year. The latest results suggest the company could achieve that. 

The net profit declined by 4.5% sequentially to $476 million in the June quarter and by 1.3% from the year-ago period. Operating margin declined nearly 200 basis points to 23.9%, from 25.7% in the March quarter. "Wage hike and cross-currency volatility have impacted our operating margin. We had a $23 million exchange gain in the March quarter, but in the first quarter, we lost $3 million due to the rupee depreciating against all major global currencies," said CFO Rajiv Bansal. Infosys rolled out a 6.5% salary increase effective April 1 Share Market Astrology

Sikka is looking to transform India's second largest IT services firm through automation and productized solutions, given the increasing commoditization of its traditional applications services and maintenance business. He has also been seeking to improve client mining - this includes the CEO's office overseeing the top 15 accounts, and sales effectiveness. The efforts seem to be paying off. The company signed six large deals with a total contract value of $688 million during the quarter. Its largest client, Bank of America, crossed $300 million in revenue and Infosys added two clients in the $200 million bucket in the quarter. "The revenue from the top ten clients grew 5.7% (sequentially) this quarter. This had declined in the previous quarter, so that's a dramatic turnaround," Sikka said. 

Analysts cheered Infosys' performance. Ankur Rudra of Hong Kong-based brokerage firm CLSA said, "Infosys reported very strong headline numbers with consensus busting 4.5% QQ $-revenue growth, strong client additions and deal wins. Strong growth across verticals and service lines indicate a business in full-fledged recovery. Strong growth in AM (application maintenance), IMS (infrastructure maintenance services), testing indicates participation in commoditized deals that Infosys was missing out on earlier Nifty Trading Tips