Infy nos beat street, but co stays guarded on FY10 outlook

Infosys Technologies' Q1 FY10 profit after tax dipped to Rs 1,527 crore as against Rs 1,613 crore on a quarter-on-quarter basis. Its revenues declined 3% to Rs 5,472 crore as against Rs 5,635 crore QoQ.

Commenting on the road ahead for the IT bellwether, the management of Infosys Technologies, speaking to Us, said it continues to remain cautious in FY10. They expect operating margins to dip by 1.5% versus 3%.
The Infosys panel included S Gopalakrishnan, Chief Executive Officer and Managing Director; SD Shibulal, Chief Operating Officer; V Balakrishnan, Chief Financial Officer; Mohandas Pai, Member of Board and Director-Human Resource; Ashok Vemuri, Senior Vice-President, Member Executive Council and Head-Banking Financial, Services and Insurance; BG Srinivasan, Senior Vice-President, Member Executive Council and Head-Manufacturing; and Subash Dhar, Senior Vice-President, Member Executive Council and Head-CME.
Speaking on the company’s rupee guidance which has come in lower than the dollar outlook, Gopalakrishnan said the guidance at the lower end has surely been increased, but remains the same at the higher end. “However, the range has narrowed. In the short-term, we expect the volatility or uncertainty to continue. But on a medium- to long-term basis, there is confidence."
According to Balakrishnan, things have changed for the full year. “Earlier, in terms of constant currency, we said guidance would be either flat or see a 4% decline. Now, we are talking about a 3-4% decline. We want to be cautious on FY10 guidance as the markets are still unstable."
On operating margins:
This quarter, Balakrishnan sees operating margins coming down by 150 bps (1% = 100 bps) instead of the earlier 300 bps. However, he said, the margins will improve in the next three quarters. He expects operating margins to come in around 31.5%. “If you look at last year, our profit before interest and tax (PBIT) was 33.2%, so probably it will be 31.5% this year.”
On tax rate:
The company said the effective tax rate for Q1 FY10 is 20%. Balakrishnan believes it will be 20% for the full year because of improvement in margins as compared to 17% in Q4 FY09. "That will probably go up to around 19-20% for the full year.”
On pricing:
Shibulal said the pricing environment continues to be challenging. A client survey showed that 60% respondents expected a protracted recovery, which would start from March 2010 onwards.
On the national ID project:
Balakrishnan said the company will bid for the government’s ID project.