Infosys Technologies Q4 revenues down 1.8%, profit up 2.6%

The software bellwether Infosys Technologies’s business took a hit in FY’09. In the fourth quarter, its revenues fell by 1.8% to $1.1bn while its net profit grew by 2.6% to $321mn. These are figures compiled under IFRS accounting norms. But the company’s figures are much better under Indian accounting norms, due to the rupee’s sharp depreciation against the dollar.

In rupee terms, its revenues grew by 24% to Rs 5,635 crore while its profits grew by 29.1% to Rs 1,613 crore. This was achieved by controlling expenditure, as software development expenses grew by only 23%, while selling, marketing and administration expenses grew by 20%. Add to that an 80% growth in other income and it was enough to propel profit growth.
The company claims that the global economic downturn is seeing its clients who have been affected by the financial crisis coming for solutions to lower costs. That may be the case but the environment has also seen a 3% drop in billing rates, affecting revenue growth. Its revenue break-up shows a significant decline in share of application development in total revenues, with other segments like business process management, consulting and product engineering services picking up the slack. The two major segments which declined during the quarter were telecom and BFSI (banking and financial services).
Infosys does not expect things to get better any time soon. It has forecast, under IFRS norms, a 6.5% to 8.5% fall in revenues in the June’09 quarter and a 13% decline in net income. It has forecast full year earnings to decline by between 11% to 15%.
But a weaker rupee in the first half of FY’10 compared to last year will make Infosys’s numbers look better under Indian GAAP. Revenues in the June’09 quarter are forecast to increase by 10.8% to 12.9% while profit is expected to grow 3.5%. For the full year, however, profit is forecast to decline by 3.3% to 7.6%.
The stock markets took this grim prognosis very sportingly. It could either mean that this poor outlook has already been discounted or that investors expect the situation to improve and that Infosys will outperform its guidance, as it has done in the past too. At a P/E of 13 times its FY10 forecasted earnings, it would appear that bad news has been factored in the price.

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