Infosys: Q2FY15 Result Analysis

Software services exporter Infosys beat analyst estimates to post a 28.6% rise in its Q2FY15 earnings on yearly basis. The company's board approved an interim dividend of Rs 30 per share and a bonus issue of one equity share for every equity share held, leading to a sharp jump in stock prices.

The consolidated net profit for Q2FY15 grew 28.6% on Y-o-Y basis to Rs 3096 crore and on a Q-o-Q basis it rose to 7.3% on strong revenue and operational growth. Revenue grew by 4.5% on Q-o-Q basis and 2.9% on Y-o-Y to Rs 13342 crore. In dollar terms, revenue climbed 3.1% sequentially and 6.5% on yearly basis to USD 2201 million.

Infosys retained its dollar revenue guidance to raise 7-9% in FY15, a number which it had given in Q1FY15. The company also managed to beat EBITDA margin estimates, which rose to 26.1% on the back of currency depreciation and cost cutting measures. “We have been able to improve our margins during the quarter and feel confident of sustaining these within a narrow band”, said Rajiv Bansal, CFO, Infosys. He further added, “This is giving us increased confidence to make the investments required to meet our growth aspirations.”

Infosys attracts more than two-thirds of its revenue from USA and Europe based clients including BT Group, Bank of America and Volkswagen. The company added 49 (gross) clients on consolidated basis in Q2FY15. The company added 14255 (gross) employees and cumulative 165411 total employees in Q2FY15. The only worrying factor during the quarter was its rising attrition rate further to a record high of 20.1% from 19.5% a quarter ago.

In order to increase the liquidity of its shares and to expand the retail shareholder base, Infosys recommended a 1:1 bonus issue of equity share. The same bonus issue is also applicable to ADR shareholders, who will get one American Depositary Share (ADS) for every ADS held as on a record date to be determined. The company also announced an interim dividend of Rs 30 per share. The record date for payment of dividend is October 17, 2014.

“The company is planning to boost investment in cloud computing, smartphone apps and other new technologies to win more high-margin outsourcing contracts”, said Vishal Sikka, CEO, Infosys.

Currently, the shares of Infosys are trading up by 6.88% at Rs 3896, outperforming the broader Nifty, which traded negative by 54 points on global clues. Infosys was the top gainer on the 50-share Nifty index.