India's second-largest IT services exporter Infosys on Friday beat street expectations by posting a 7.3 percent sequential rise in net profit for July-September quarter (up 28.6 percent on yearly basis) to Rs 3,096 crore (on consolidated basis) on strong revenue and operational growth.
Revenue during the quarter grew by 4.5 percent quarter-on-quarter (up 2.9 percent Y-o-Y) to Rs 13,342 crore and dollar revenue climbed 3.1 percent sequentially (up 6.5 percent on yearly basis) to USD 2,201 million in the quarter gone by (in constant currency revenue growth was 3.9 percent Q-o-Q and 6.3 percent Y-o-Y). Profit in dollar terms was up 6 percent quarter-on-quarter (up 33.4 percent Y-o-Y) to USD 511 million.
In an interview with CNBC-TV18's Latha Venkatesh and Reema Tendulkar, Ankit Pande of Quant Broking eyes upward revisions in earnings. Furthermore, he estimates actual dollar revenue to grow by 7-8 percent for FY15, and 12 percent for FY16.
Below is the verbatim transcript of the interview:
Q: So first thoughts did you get an idea of where company is headed from Dr Sikka?
A: As you rightly pointed out, there is not that much that he offered. We did have an idea that there will be over focused on digitization and innovation and these things. However, there was on very major development as such on this little piece of press announcements. So we do see that in the future we will have to look at pieces of consulting and service lines the vertical strategy go to market a little bit more in a more integrated fashion.
At the current juncture the company goes to the market by verticals and it has vertical unit heads and consulting and other horizontals blend into each of these verticals. However in the future this may be a different model altogether so we will have to wait on that how the company goes to market completely differently and offers these new services that it is talking about. It could be a completely a different thing so we will have to wait on that.
Q: Lets talk about what we know those are the Q2 earnings have you changed your assessment or any of your estimates on Infosys post these earnings either on the dollar revenue or in the margins and even on the Earnings per share (EPS) front?
A: Not really that much we did expect actually that they might say that constant currency wise 79 percent yes but on the reported dollar growth they may revise it now by as much as 100 basis point. So remember that the AUD, the GVP and EUR have moved sharply downwards by 5-7 percent with the respect to the US dollar. And these constitute by 24.50 percent of Infosys revenues. So for the half year you could have a situation as much as 100 basis points impact so with 7-9 percent growth that they have stated that’s a constant currency upwards revision of close to 100 basis points.
In that compounded quarterly growth rate (CQGR) wise, over the next two quarters that's 1.5 percent to 3.8 percent at the upper end. The asking rate at the upper end is a little bit stiff. So we will stick to 7-8 percent kind of range for this year as far as growth is concerned and for the next year we will have to wait and see we will have to contemplate a little bit as to how to shape the growth profile. But we currently looking at about 12 percent and we will hold back fro now. As far as margins are concerned, we will maintain 25-26 earnings before interest and taxes (EBIT) margins this year and the next. So EPS wise the only change that there will be because of USD and INR assumptions we will have to take it up a little bit currently we are at Rs 60 so if we take close to Rs 63 next year that’s close to 5 percent depreciation of rupee and that will add about 7 percent to earnings. Therefore, there will be upward revisions in earnings from our side.
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