Infosys Limited has whipped up a fresh round of enthusiasm in the market, recording a near 10% rise in net profit for the second quarter, amid fears of an economic slowdown. Infosys benefited from the weak rupee even as outsourcing orders rose. The weakening Indian currency added 1.5% to operating margins of the firm in the second quarter, and margins in the third quarter could rise 1.6%, the company predicted.
India?s second largest IT services exporter has not been turning in impressive results for the past few quarters, and there were concerns on what it would turn up in the July-September quarter. As the results broke on Wednesday morning, it was clear that Infosys had not lost all of its magic, despite recent reversals. The KV Kamath-Kris Gopalakrishnan team can afford a smile, having been able to turn around Infosys?s fortunes. The company reported a 9.72% growth in its consolidated net profit to R1,906 crore. It had posted a net profit of R1,737 crore for the September quarter. Its revenue swelled to R8,099 crore in Q2, up 16.58% from R6,947 crore in the year-ago period. It was a show reminiscent of its performances during the last decade. But before we get too carried away, it may be prudent to check some not-so-great facts. Infosys cut its dollar revenue growth forecast to 17-19% for the fiscal year, from 18-20% as projected earlier. Infosys management, despite the confident showing, sounded a note of caution stating that the global macro-economic environment was still uncertain. The company expects operating margins to fall by about 1% this fiscal. However, Infosys CFO V Balakrishnan admitted that the global currency market continued to remain highly volatile on the back of weak economic recovery in most of the developed markets. His sentiment was shared by CEO SD Shibulal, who said the uncertain environment should be a concern for the IT industry.
Having said that, Q2 has proved that clients are looking for new opportunities for growth, accelerated innovation and increased returns on investments. This is good news for India?s IT services industry, which has not seen the best of times in the recent past. Outsourcing looks in good health at this point and, for Infosys, it has been a good comeback after three successive quarters of underperformance. Infosys?worth around $29 billion?has lost more than 25% of its market value this year, in line with the fall in the sector index. Wednesday?s result is bound to change some of that.