Bellwether

Much awaited numbers of Infosys Technologies Limited (Infy) are announced this morning. Beating the bearish sentiments of the street, which has been expecting a slowdown in the prospects in the wake of appreciating rupee, Infy has come out with stupendous performance, lifting the markets by nearly 170 points (at the time of writing this piece). Infy is up by 4 percent.

Income for the year ending March 31, 2007 was up by 46% to Rs13,893/- crores and net profit (after tax) was Rs.3850 crores showing a growth rate of 56.6%. Annualised EPS was up by 53% to Rs.69.11 from previous year’s Rs.45.03. The Board recommended a final dividend of 130%.

It has in fact become a custom for the company to come out strong figures quarter after quarter. The results have even beaten its own guidance by a big margin.

The company forecasts conservative growth for the immediate quarter and for the whole of financial year. It indicates in its guidance that income will grow at 29.2% – 29.8% and EPS will grow at 24.2.%. Lower estimates are understandable on account of premature withdrawal of tax holiday to IT companies and the imposition of MAT and the rising rupee.

Despite these, I am upbeat about the actual performance of Infy. It will be higher than the forecasts on account of various factors stated in its press release. Acquisition of 34 new clients, prized one being European aerospace giant (guess it is EADS); Infosys BPO continued its growth momentum and has been strengthening its operations by entering into lucrative markets and sectors. It was recently ranked fourth globally in the first ever FAO (Finance and Accounting Outsourcing) worldwide ranking of service providers. One of the world’s largest media and entertainment conglomerates has reportedly signed up for providing a range of services across the media process outsourcing spectrum. Infosys Consulting Inc. has been well positioning in the highly competitive business of consulting and has been fairly successfully in transforming the business of its clients winning the trust in the process; is likely to join the big four very soon.

Though share price-wise, it may not do wonders in the short term, it promises to deliver fair returns in the medium to long term horizon. A look at the balance sheet shows that reserves and surplus of Rs.10,876 crores, whereas share capital stands at Rs.286 cores. Infy may reward its shareholders with a bonus issue in the near future.