BANGALORE -Infosys Technologies Ltd., India’s second-largest software exporter, posted a 51.5 percent rise in third-quarter profit as it won more business in Europe, but its shares dropped as the market had hoped for better results and a stronger outlook.
Bangalore-based Infosys, the first Indian firm to join the Nasdaq 100 Index, raised its 2006/07 earnings per share forecast to 66.63 rupees before exceptionals, up 48 percent on 2005/06 and better than a 66 rupee/share forecast made in October, but said a stronger rupee was hurting operating margins.
Infosys shares fell as much as 3.2 percent in early trade, and by 0600 GMT were down 2 percent at 2,125 rupees in a slightly firmer Mumbai market.
The company, which ranks behind Tata Consultancy Services Ltd. in India’s booming software services industry, develops applications, designs supply chains and offers back-office facilities. Its clients include ABN AMRO and Goldman Sachs.
October-December net profit rose to record 9.83 billion rupees ($220 million) from 6.49 billion rupees a year earlier, in line with a Reuters poll of 10 analysts’ forecasts for profit of 9.79 billion rupees.
“Though they have beaten their own estimates, they barely managed to meet market estimates,” said V.K. Sharma, head of research at Anagram Stock Broking Ltd. “The outlook is also mellowed.”
Chief Financial Officer V. Balakrishnan said the rupee appreciated against all major currencies in October-December, knocking 200 basis points off the firm’s operating margins.
Revenue rose 44.4 percent to 36.55 billion rupees as Infosys picked up 43 new clients during the quarter and hired a net 3,282 employees. The Reuters poll had forecast revenue of 36.89 billion rupees.
Infosys has roughly doubled its revenue over the past two business years to more than $2 billion as it won more outsourcing contracts from Western clients seeking to cut costs. Having relied heavily on the United States for revenue growth, it is spreading its operations to other parts of the world.
“We have seen accelerated growth in Europe, which continues to be a key focus market for us,” Chief Operating Officer S. Gopalakrishnan said.
The software and back-office services industry, which earns 90 percent of its revenue from overseas clients, expects exports to rise 27-30 percent to $29-$31 billion in the year to March 31.
The increase in outsourcing by global companies has led to higher prices for software services firms, despite rising competition among Indian companies.
“The pricing environment continues to be stable with an upward bias. We have seen a slight increase in per capita revenue during the quarter,” said D. Shibulal, head of worldwide customer sales and delivery.
Shares in Infosys, valued at more than $27 billion, rose 21 percent in the December quarter, in line with the IT sector index and almost double the main index’s gain.