GO
Loading...

Infosys Profit Beats Estimates, Forecast Muted

India's second-largest software exporter, Infosys Technologies, reported a forecast-beating 70% rise in consolidated quarterly profit as outsourcing by foreign clients surged, but predicted more modest earnings growth for this fiscal year.

Infosys shares were volatile after the results, swinging between a fall of 0.8% and a rise of 3.5% in early trades in a firm Mumbai market.

The company said per share earnings, before exceptionals, for the current fiscal year were expected to grow by 20-22% to between 80.29 and 81.58 rupees, which traders said was muted by its standards.

That compared to a 53.5% surge in per share earnings before exceptionals to 69.11 rupees for the fiscal year that ended on March 31.

"Our liquidity position continues to be strong with cash and cash equivalents reaching $1.4 billion," V. Balakrishnan, chief financial officer at Infosys said in a statement.

Nasdaq-listed Infosys , which develops applications, designs supply
chains and offers back-office services, said on Friday its consolidated net profit was 11.44 billion rupees ($267 million) in the three months ended March, versus 6.73 billion in the same period a year ago. That compared with a mean net profit of 10.31 billion rupees in a Reuters poll of 14 brokerages.

Analysts say the software and back-office services industry, which earns nearly 90% of its revenue from overseas clients, will win more outsourcing jobs in the coming months from foreign firms that are looking to cut costs at home.

India's large pool of English-speaking engineering workforce and cheaper wages of nearly one-fifth of Western salaries have helped to attract outsourcing.

But the services firms' ability to raise billing rates to offset higher wages and other costs may be limited because of the specter of a U.S. economic slowdown, said analysts.

Top exporter Tata Consultancy Services and third-biggest Wipro are expected to report their profits grew 47.8 and 29% respectively, the Reuters poll showed. TCS is due to report on Monday and Wipro on April 20.

India's software services exports are expected to have risen 33% to $31.3 billion in 2006/07, and are targeted to hit $60 billion by 2010 as firms such as Infosys and TCS take advantage of low-cost labor to grab global outsourcing.

Shares in Infosys, which counts ABN AMRO and Goldman Sachs among its clients, fell around 10% in the March quarter, compared to more than a 7% decline in the IT sector index and 5% dip in the main BSE index.

Contact U.S. News

  • CNBC NEWSLETTERS

    Get the best of CNBC in your inbox

    › Learn More

Don't Miss

U.S. Video