Ever since Infosys announced its Q3 results, analysts and trade pundits have been busy analysing why Infosys did so well. Many are of the opinion that this is just a blip and the trend may not last. What magic has Infosys done in a matter of weeks, many wondered. Over analysing simple facts has become a way of life for some, as can be seen from the amount of deliberate confusion that has been created. The straight forward truth is that Infosys has shown substantial recovery in the October-December quarter and has managed to project a very healthy forecast. There is no ambiguity here. When sales click, scheduled agreements get signed and costs are managed, good results are achieved.
After a remarkably lean period, Infosys got its act together during the quarter winning fresh outsourcing deals that yielded $731 million. This augurs well for the $100 billion Indian IT industry as a whole. It grew the European market by 16% in revenues, when everyone thought Europe would continue to remain a weak spot.
Year 2012 was a big disappointment for everyone associated with the industry. Business volumes had dropped alarmingly, margins were under sever duress and employees on the bench piled up significantly during that time. Projections for 2013 were not rosy by any means, but going by what Infosys has dished out in Q3 there could be some light at the end of this long, dark tunnel.
For Infosys, its key acquisition last year has provided the extra cushioning. Revenues from Switzerland-based consulting firm, Lodestone, came in to prop up the numbers this time with sequential revenues in rupee terms growing by 5.7% to R10,424 crore. The sequential net profit of R2,369 crore has remained unaltered, despite the Street expecting lower numbers. It is clear the sales engine has been whipped into action. Costs have been kept under control and operational efficiencies have been improved upon. Infosys CFO Rajiv Bansal touched upon these aspects while explaining the reasons behind the improved showing. The company’s sales force has not been in top form for a few quarters now, for largely unexplained reasons.