Mysore: Infosys, the country's second largest software exporter, on Tuesday posted 15.72 per cent jump in net profit at Rs 1,722 crore but expressed caution on the global economic environment, especially in Europe.

"We continue to believe it would be a normal year as we do not see relaxation in IT budgets. Concern is when the IT budgets will be spent. This is where the uncertainty will have an impact," Infosys CEO and MD S Gopalakrishnan said.

On quarter-on-quarter basis, net profit was down 5.2 per cent. The number narrowly missed market expectations and dragged the company shares down 4.27 per cent to Rs 2,794.25 a
piece on the Bombay Stock Exchange.

"The dip in the stock was largely because the Q1 results were below street expectations," Ashika Stock Broking Research Head (Equities) Paras Bothra said.

He added Infosys was going through a bad patch, while transition of management was also keeping a check on the company as far as valuation premium was concerned.

Attributing the decline in sequential net profit to wage hike, Infosys CEO and MD S Gopalakrishnan said, "We believe over the year, this will be muted and it will be lower".

The impact of compensation on margins was around three per cent.

While offshore employee wages have been hiked by 10-2 per cent, onsite employees by two to three per cent, Infosys CFO V Balakrishnan said.

Infosys has met its revenue forecast for the quarter ending on June 30, 2011, registering revenues of Rs 7,485 crore for the quarter under review, which is a 20.8 per cent growth
on an annual basis.

The company had said it expected revenues to be in the range of Rs 7,311 crore and Rs 7,382 crore in April-June quarter.

The IT bellwether expects revenues for the quarter ending September 30, 2011 to be in the range of Rs 7,699 crore and Rs 7,810 crore (y-o-y growth of 10.8 per cent to 12.4 per cent).

In addition, the company forecast its revenues to be in the range of Rs 31,777 crore and Rs 32,311 crore (y-o-y growth of 15.5 per cent to 17.5 per cent) for FY'12.

"Discretionary spend is flat and is not really ramping up, so it leads us to believe that we need to be cautious. We have three more transformation deals in Q1 on the pipeline.
Our products and platforms are seeing good traction in the market but we have remained cautious with our guidance," Shibulal said.

The USD 60 billion Indian IT sector has witnessed rebound on the back of strong demand after the global economic slowdown. Though Infosys and rival Wipro have been posting
muted numbers in the last few quarters, other players like TCS and Wipro have posted stellar performances.

On Infosys' approach over the quarters, Gopalakrishnan said, "We believe it is better to be cautious. But we are taking bold decisions when it comes to recruitment. We will prepare ourselves, make the investments necessary and transform ourselves and better our past to take advantage of growth opportunities."

During the quarter, Infosys added 26 new clients and hired 2,740 (net) new staff inducted during the first quarter, taking the employee strength to 1, 33,560.

Talking about volume growth, Gopalakrishnan said, "We have had good four per cent volume growth this quarter. We believe that this year we are going to see an even growth
rather than a front-loaded or back-ended growth."

The company has recently undergone a management rejig and will see Gopalakrishnan becoming the Executive co-Chairman with veteran banker KV Kamath. Shibulal will take over as CEO from August 21, while the current Chairman NR Narayana Murthy will become Chairman Emeritus.

"We have reorganised the company to be more industry domain focussed, which will accelerate innovation and make us more responsive to clients' needs. We believe that Infosys is well positioned to be a transformational partner for large clients as they navigate through uncertain times," the company CEO said.

S D Shibulal, Member of the Board, said the company's top five clients grew by 8.2 per cent this quarter. "Volumes grew by 4.0 percent as a result of our tactical engagements with large clients."

"Our initiatives to address the company's transition into the next-generation of global consulting and technology services will position us as a high-quality player in the IT
services space," he said. 

Shibulal said Infosys has realigned its structure and was investing in building out on consultancy and system integration.

"Some of the realignment would help clients take advantage of technology trends. This will also help look at new engagement models based on pay for use, which is different from the traditional model. The company would now make investments upfront and clients would pay as per use," he said.

On the revision of its travel policy called business visitor travels to the US and employee guide, Gopalakrishnan said the company periodically reviewed the policy, based on
the best practices of the industry and understanding the requirements.

He, however, refused to comment on the visa policy, saying the issue was still be resolved and it was working closely with authorities on the issue. He said Jack Palmer, an Infosys
employee ,who had accused the company of visa fraud, continued to be an employee.


(Agencies)