Infosys' profit grows on cost cutting, offshore work

The company has restructured its management to return to high growth

Indian outsourcer Infosys saw its profit rise in the fourth quarter as a result of cost cutting and productivity improvement measures, including doing more work offshore in India.

The company reported Friday that its profit was US$463 million, up 6.7 percent from the same quarter last year under IFRS (International Financial Reporting Standards). The company's profit had dropped by 11 percent year-on-year in the third quarter.

Revenue for the fourth quarter was also up, by around 10 percent, to $2.1 billion.

CEO S.D. Shibulal said in an earnings webcast that the business environment has improved, though marginally. Client budgets are stable, but customers are looking for cost optimization, which challenges the company to come up with newer services.

Infosys raised its revenue growth forecast for the its fiscal year ending March 31 to up to 12 percent. It had forecast revenue growth of 9 percent to 10 percent for the fiscal year when reporting results for the third quarter in October.

The company's revenue growth in rupees was higher at 25 percent, while profit grew by over 21 percent, in part because of a weaker Indian rupee against the U.S dollar.

Infosys' margins in the quarter were above expectations, and came mainly from reduced staffing and selling and marketing expenses, according to Dipen Shah, analyst at Kotak Securities. The company's staff attrition rate at beyond 18 percent annualized was a cause for concern, he said.

The company continues to restructure its management, some of it driven by the exit of some key staff. In January, it added a tier of two presidents, reporting to Shibulal, to run the business portfolios. The company has in addition an executive chairman and an executive vice chairman.

The number of staff at Infosys was down by close to 2,000, taking the total to 158,404 employees at the end of the quarter. The number of active clients in the quarter was 888, up from 873 in the previous quarter.

North America remains the largest market for Infosys, accounting for 60 percent of revenue, with Europe accounting for around 25 percent.

Infosys has been trailing larger rival Tata Consultancy Services for a number of quarters, leading the company's co-founder and first CEO, N.R. Narayana Murthy, to return as its executive chairman in June last year.

Infosys continues to invest in technologies that can be reused across a number of customers. It launched in December its TradeEdge, a sales platform to help global brands manage distribution and retail in emerging markets.

John Ribeiro covers outsourcing and general technology breaking news from India for The IDG News Service. Follow John on Twitter at @Johnribeiro. John's e-mail address is john_ribeiro@idg.com

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