Infosys posts strong revenue growth as markets recover

Despite the revenue growth, the company's profit remained flat because of a hike in salaries and the impact of currency fluctuations

Infosys posted strong revenue growth in the second quarter as demand picked up in key markets including the U.S.

However, the Indian outsourcer's net profit grew only 0.5 percent year on year as the company increased salaries for staff in India and elsewhere.

Profit was also affected by currency fluctuations, particularly the depreciation of the Australian dollar, and low staff utilization, said Ashok Vemuri, Infosys' head of Americas, on Friday.

Revenue was close to US$2 billion in the quarter, up by 13.6 percent year-on-year. Net profit for the quarter was $418 million.

Infosys has also maintained its earlier forecast for revenue growth of 6 to 10 percent for its fiscal year to March 31, 2014. The forecast does not, however, factor in an immigration bill in the U.S., which if passed in its current form could increase costs for outsourcers and lead to more work getting done offshore, Vemuri said.

The bill would among other things prevent companies with more than 15 percent of their U.S.-based staff on H-1B visas from placing those employees to work on-site for U.S. companies. It was passed by the U.S. Senate, but has encountered difficulties in the House of Representatives.

The strong revenue growth comes after a quarter when Infosys saw its revenue grow 9.4 percent, but profit decline by about 4 percent. Once the darling of investors, Infosys was seeing lackluster growth in revenue and profit compared to Indian competitors such as Tata Consultancy Services. This led Infosys' co-founder and first CEO N. R. Narayana Murthy to return to the company as executive chairman on June 1.

In the U.S., Infosys benefited during the quarter from a recovery in the economy, and saw its business from the automotive sector grow strongly as car sales picked up, Vemuri said. Growth from financial services in the U.S. is still not as strong, while demand from Europe is still slow, he added.

The outlook is good for the company, as many large outsourcing deals come up for renewal in the industry, Vemuri said. The company's "Infosys 3.0" strategy, which aims at a greater focus on reusable platforms and products, and high value services like consulting and systems integration, is paying off, he said. "In spite of an environment where discretionary spend continues to be challenged, we continue to grow our consulting and systems integration," Vemuri added.

Infosys added 575 staff in the quarter, taking the total to 157,263 employees as on June 30. It also added 66 clients in the quarter.

John Ribeiro covers outsourcing and general technology breaking news from India for The IDG News Service. Follow John on Twitter at @Johnribeiro. John's e-mail address is john_ribeiro@idg.com

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