Infosys Q2 profit jumps, raises full-year forecast

BANGALORE (Reuters) - India's number-two software exporter, Infosys, posted a better-than-expected 36 percent rise in quarterly net profit and raised its full-year forecast as Western clients ramp up their outsourcing of technology jobs.

Shares in the firm rose to their highest in over five years.

Infosys Technologies Ltd, which is expanding in China and chasing high-profit consulting work to match rivals Accenture and IBM, said full-year earnings would rise by nearly 30 percent to at least 89 rupees per share.

It had previously forecast 23-25 percent full-year profit growth as it absorbed higher staff costs, a problem faced by local players as they compete with multinationals for talent in a hiring spree to support the industry's rampant growth.

Bangalore-based Infosys said its gross hire of 8026 staff in July-September was the highest ever in a quarter.

Infosys forecast its revenues for the year to end-March 2006 would grow by more than 31 percent to above 93.5 billion rupees, 5 percentage points above its previous forecast.

July-September net profit rose to 6.06 billion rupees from 4.47 billion a year earlier, while revenues rose to 22.94 billion rupees from 17.5 billion. A Reuters poll of 10 brokerages estimates had a median net profit of 5.78 billion rupees on sales of 22.64 billion.

Infosys shares, valued at US$16.2 billion, rose 2.3 percent to 2,683 rupees and as high as 2,727 rupees -- their best since March 2000 -- helping lift a flat Mumbai stock market.

Infosys, also listed on Nasdaq, lagged industry leader Tata Consultancy Services Ltd (TCS) in 2004 revenues, but has overtaken its Mumbai-based rival, and Accenture, in market capitalisation.

Infosys's results and better forecast, coupled with steadier margins as the rupee eased against the dollar, set a positive tone for earnings in a US$17 billion software industry that relies on English-speaking engineers paid a fifth of Western wages.

Software firm iGATE Global Solutions Ltd reported on Tuesday an 85 percent rise in quarterly earnings and mid-sized Aztec Software Ltd said on Monday it more than doubled its quarterly profit.

TCS and MphasiS BFL Ltd report later on Tuesday.


Growth in Europe, finance

Chief operating officer Kris Gopalakrishnan said in an interview that sales growth would slow in the fiscal fourth quarter to end-March as overseas clients adjust budgets in the first calendar quarter. But overall business looked good, with financial services clients and Europe the key legs of growth.

Chief financial officer T.V. Mohandas Pai described the pricing environment as "stable with an upward bias".

Margin pressure in the export-oriented industry eased in the quarter as the rupee dipped more than 1.1 percent against the dollar and billing rates improved for software projects.

"What we want to do is if we get improvement in the margin, we want to invest that back into the business. So margin will hold steady," Gopalakrishnan said.

Infosys' US-based business consulting subsidiary, set up to do high-margin work to match rivals such as Accenture, was expected to break even in the fourth quarter, he said.

Shares in Infosys, which recently added ABN Amro to a client list which includes Bank of America, have gained nearly 28 percent in 2005, outpacing a 23 percent rise in Mumbai's BSE information technology sub-index.

Infosys added 34 clients and a net 6390 employees, bringing its workforce to 46,196. After hiring 12,500 in the first half, it plans to add 7700 more in the second half.

"Good client addition and the sharp ramp-up in its million dollar client base adds to the positive side of the performance," said Sameer Goyal, research analyst at Anand Rathi Securities.

TCS, Infosys and Patni Computer Systems were each awarded part of a US$2.2 billion outsourcing deal from Dutch bank ABN Amro last month, a sign the industry is coming to rely less heavily on the United States.

Accenture and IBM, also part of ABN Amro's deal, have been hiring in India by the thousands to turn up the heat on the big local players.

Additional reporting by Shailendra Bhatnagar in New Delhi.

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