Re: {LONGTERMINVESTORS} Re: Infosys
RAJESH DESAI
Q4 Results 2012: Infosys delivers shocker, what's the real problem?
The management of Bangalore-based Infosys agitated the already-tensed nerves of market by saying that FY13 guidance at 8-10% is below the NASSCOM's guidance of 11-14%. This statement by the company has shocked many analysts, who belive the IT sector is in for a re-rating unless TCS tops NASSCOM's expectations. NASSCOM has said it may review growth guidance after TCS & Wipro results.
Analsyts expect this kind of news is disasterous for markets and the IT sector; Infosys opened nearly 10% lower and also took TCS along with it, which sank 5%. Infosys' consolidated net profit for the fiscal fourth quarter ended March 31 rose to Rs 23.16 billion from Rs 18.18 billion a year earlier.
The real problem
An uncertain global economy and
rising US rhetoric against shipping of jobs to low-cost locations ahead
of the November presidential election remain concerns for the sector
that gets half its revenue from the world's largest economy. Tata
Consultancy, Infosys and No. 3 exporter Wipro are also facing increased
competition from bigger global rivals such as IBM and Accenture for a
bigger share of the outsourcing business.
Experts react
With Infosys disappointing investors with its fourth quarter earnings and EPS guidance, analsysts say going forward investors will be stock-specific rather than looking at sector.
Speaking to CNBC-TV18, Moshe-Katri of Cowen & Co said Infosys is
going through company-specific problems. A few years ago, Wipro went
through some problems, but it restructured itself to overcome it. Infy
has a very competitive position in the market, and should find a way to
revive itself.
Sudarshan Sukhani, did not find any problem with the
company, but warned investors never to go long on stocks on the eve of a
big news.
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CA. Rajesh Desai
RAJESH DESAI
Infosys results: Q4 net down 2.4% at Rs 2316 cr;
sees FY13 EPS @ $ 3.12-3.17
Infosys , country's second largest software services exporter has reported mildly better than expected net profit of Rs 2,316 crore for the fourth quarter of FY12, a fall of 2.36% QoQ. CNBC-TV18 poll of analysts expected it at Rs 2,290 crore.
The company has disappointed the street by its revenues and EBIT, though profits came in slightly higher than expectations. Even the company missed its guidance for its earnings per share
However, revenues fell 4.8% QoQ to Rs 8,852 crore, which was quite lower than CNBC-TV18's expectations of Rs 9,148 crore.
Earnings before interest and tax too dropped 8.7% QoQ to Rs 2,647 crore - that was well below its expectations of Rs 2,750 crorore.
EBIT margin dropped at 29.9% in the fourth quarter of FY12 as against 31.17% in the previous quarter.
However, the company has made investors happy by giving a special dividend of Rs 10 a share.
Q1 and FY13 guidance
Company expects earnings per share in terms of dollar at USD 3.12-3.17 for FY13, a growth of 4-5.7%.
Revenues are expected to grow by 8.10% in FY13 as against expectations of 12-14%, company says.
For the first quarter of next financial year, earnings per share will be USD 0.73, an increase of 9% YoY
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CA. Rajesh Desai
RAJESH DESAI
Infosys , country's second largest software services exporter has come out with its fourth quarter FY12 numbers today. It has disappointed the street by its revenues and EBIT, though profits came in slightly higher than expectations. Even the company missed its guidance for its earnings per share.
The company's net profit was of Rs 2,316 crore for the fourth quarter of FY12, a fall of 2.36% QoQ. Its revenues fell 4.8% QoQ to Rs 8,852 crore.
Earnings before interest and tax too dropped 8.7% QoQ to Rs 2,647 crore. EBIT margin dropped at 29.9% in the fourth quarter of FY12 as against 31.17% in the previous quarter.
However, the company has made investors happy by giving a special dividend of Rs 10 a share.
Q1 and FY13 guidance
Company expects earnings per share in terms of dollar at USD 3.12-3.17 for FY13, a growth of 4-5.7%.
Revenues are expected to grow by 8.10% in FY13 as against expectations of 12-14%
For the first quarter of next financial year, earnings per share will be USD 0.73, an increase of 9% YoY
In dollar terms, company sees revenue growth of 6-7.1% as against market expectation of 2.5-4%
Infosys has touched an intraday high of Rs 2,540 and an intraday low
of Rs 2,451.25. At 09:16 hrs the share was quoting at Rs 2,475, down Rs
275.05, or 10%.
It was trading with volumes of 89,684 shares.
In the previous trading session, the share closed down 1.87% or Rs 52.30
at Rs 2,750.05.
CLSA has put Infosys target price between Rs 2,158-2,490 per share.
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CA. Rajesh Desai
RAJESH DESAI
Whistleblower calls out IT giant over U.S. jobs...............
By John Miller
(CBS News) We've all had this happen: you call an American company's 800 number for help, and end up talking to someone in a foreign country. It's called outsourcing. American firms do it because foreign labor can be cheaper.
But now, one company is being accused of bringing those lower-paid workers to the U.S. illegally and that may be costing Americans jobs.
The allegations are the subject of a federal probe and CBS News has been investigating this story for months. The allegations have been made against a giant Indian information technology firm called Infosys. The charges are coming from inside the company, from an employee who has never spoken publicly before.
Jay Palmer is a principal consultant at the company called Infosys. He is also the whistleblower whose charges sparked the federal investigation. Palmer says, Infosys, the global high tech giant engaged in a systematic practice of visa fraud, a charge the company denies.
Palmer said the first thing to catch his attention was an employee that had been in the U.S. from India several times before.
"He came up to me and he was literally in tears," Palmer said. "He told me he was over here illegally and he didn't wanna be here. He was worried that he would get caught."
Palmer says he began digging into how and why Infosys seemed to be bringing in large numbers of workers from its corporate headquarters in Bangalore, India, into the U.S.
Palmer says at first, most came over on H-1B visas. These visas are for people with specialized talents or a level of technical ability that can't be found among American workers.
When asked if all the people had some special expertise that couldn't be found in the U.S., Palmer said, "Absolutely not. Not even close. Many of them is what we call freshers. People that would just come over, whoever they could get to come over. Whoever got accepted for a visa."
Many of the people brought in, in fact, didn't know what they were doing at all, Palmer said. "There was not a project or program that I was involved in that we did not remove somebody because they had no knowledge of what they were doing," he said.
So then what's the motive to bring them in? You could hire an American who is trained in that particular discipline and do better.
Palmer said, "It's purely profit."
Palmer says the Indian workers on his team were paid substantially less than an American would have made in the same job.
When the U.S. State Department began to limit the number of H-1B visas, Palmer says Infosys began using another type of visa, the B-1. The B-1 is meant for employees who are traveling to consult with associates, attend training or a convention. But Palmer says the employees were brought in not for meetings, but for full time jobs.
Palmer said the jobs were in "Everything from coding software to testing software to fixing software to installing."
So why would Infosys do this? And what advantage did it give them in the marketplace?
Palmer said, "They could outbid everybody or underbid everybody on every contract (because they were paying less.) For example...if I'm gonna pay you $15,000 a year why would I pay an American or a legal worker $65,000 a year? It makes no - it's just economics."
And Palmer says the B-1 workers never paid U.S. taxes because they received their salaries from India.
"They're basically a lot of times being paid on a cash card or a debit card where money was put in their account," Palmer said. "And the fact is, is they're just taking that money out and they're never paying U.S. taxes."
Infosys may not be a household name to many Americans, but in the technology business, the company is a powerhouse. It is one of the biggest consulting firms in the world with more than $6 billion in revenues last year alone, and 145,000 employees in 32 countries. But the bulk of its business comes from the U.S., re-engineering the computer systems of some of the biggest names in corporate America.
Federal officials say Infosys employees have 6,000 B-1 visas good for 10 years. Palmer says if just half of those employees were working on U.S. soil that would earn the company more than $150 million a year more than if they paid Americans the prevailing wage.
Infosys declined CBS News' repeated requests for an on-camera interview with a company executive or with chief executive officer and chairman S.D. Shibulal. But the company's chief financial officer, V. Balakrishnan, has denied the charges on Indian television, saying, "I think we are very clear that we have not violated any of the rules. We believe we have a strong case."
Infosys did give CBS News a statement saying, in part, "Any allegation or assertion that there is or was a corporate practice of evading the law in conjunction with the B-1 visa program is simply not accurate, and we will vigorously defend the company against any false allegation to that effect."
But one of Palmer's most serious allegations is that top company executives not only knew of the alleged fraud, but wanted to expand on it to increase profits. Palmer says during a 2010 meeting at Infosys' corporate headquarters in Bangalore the practice was discussed with a group of executives, including a senior vice president.
Palmer told CBS News, "There was some conversations about how to increase the share price, which is - in America is the stock price. So it's really about getting people over no matter what the cost or whatever. And you know, I think that's the first time I heard the term, you know, 'Americans are stupid.'"
When asked what that was in reference to, Palmer said, "The law, getting around the system."
When asked, "Because it was so easy?" Palmer replied, "Oh, it's totally easy."
Palmer said others at Infosys discussed the matter with him. And one of those people was Palmer's friend and Infosys project manager, Marti Harrington.
Harrington told CBS News, "I realize that there were a few times where they were really pushing me, they, Infosys, was really pushing me to get the client to agree to having more people onshore. They were still getting more money because they were paying these folks from India so little."
When Harrington learned that the B-1 visa specifically prohibited employment here, she checked the visa status of some of her own team members.
Harrington said, "And then I realize that we had people here, we being, you know, employees in Infosys - had people here that were in the States on B-1 visas that were working. You know, they weren't here to attend training or, you know, to attend a conference. They were here working on a project."
According to Palmer, telling documents come from an internal Infosys website. One document appears to be a "do's and don'ts" list that gives instructions on how to get B-1 visa requests by the U.S. State Department, telling managers not to mention things like work or employment on their applications or in interviews with U.S. Customs and Border Patrol agents.
When asked when he saw the information on the internal website what struck him, Palmer said, "Intent. Deliberate. Not even trying to follow the spirit of the law."
When asked if the internal document on the website was an instruction guide on how to beat the system, Palmer replied, "Yes, in my opinion, absolutely."
Palmer says after he blew the whistle to Infosys executives, they retaliated against him. He's now suing the company. Infosys denies Palmer's allegations and denies that the company ever retaliated against him.
In its statement to CBS News, Infosys said, "Mr. Palmer's allegations may make an interesting story, but the case before the court isn't about a story. It's about facts and the facts are clear and compelling."
When asked for his response to that statement, Palmer said, "It's the United States of America. If they want their day in court, let's - let's let them have their day in court. And we can lay the compelling facts out and let a judge and a jury decide."
CBS News senior correspondent John Miller asked Palmer, "When this is all over and it all comes out, where is Jay Palmer? Are you gonna be able to work in this business again? Do you look like a hero or are you the goat?"
Palmer said, "I don't know. You know, it's not about me. This story is about displaced American workers and about companies out for greed."
Palmer's civil suit against Infosys is scheduled to go to trial this summer in Alabama.
So are the other companies doing this?
Miller said, "I think other companies are doing this. Just this week another lawsuit was filed in New Jersey against a different company alleging the same practices of visa fraud and abuse."
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Manohar UmrigarOnly Investors make money.
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CA. Rajesh Desai
RAJESH DESAI
pfa
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CA. Rajesh Desai
RAJESH DESAI
Infosys, a global leader in consulting and technology, launched the Infosys Cloud Ecosystem Hub. This comprehensive solution enables enterprises to create, adopt and govern Cloud services across the ecosystem. The businesses can now accelerate time-to-market of Cloud services by up to 40%, improve productivity by up to 20% and achieve cost savings of up to 30%.
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CA. Rajesh Desai
RAJESH DESAI
How Infosys can regain market lead amid gloomy economic environment, increasing competition
Infosys, touted as the IT sector bellwether not long ago, has been seeking ways to boost business prospects amid challenging economic environment and increasing competition. While much of the analyst and investor attention is paid to its inorganic strategy, the prowess of the IT stalwart in successfully launching and managing globally acceptable product platforms remains rather ignored.
Considering that most of its top-tier peers do lack a sizeable presence in the products category, an intense effort to expand the scope of its products capabilities spanning verticals will serve as a major differentiator for the company, which faces severe competition in the commoditised IT services space.
Its peers in the IT services field such as Cognizant and HCL Technologies operate at relatively lower profitability to grow their top line rapidly. As a result, in each of the nine quarters to June 2012, the revenue of these two companies on a trailing 12-month basis grew faster year-on-year compared with that of Infosys. In addition, Cognizant toppled InfosysBSE -0.36 % as the second-largest IT player with major operations in India based on the June 2012 quarterly revenue.
Several options are available for Infosys to regain its lead. The utilisation of its cash and investments of over Rs 20,546 crore to expand across focus areas, either organically or through acquisitions, will be the top priority, especially after Lodestone.
Infosys is also among the rare few top Indian IT companies that have been able to carve a niche in IT products. Finacle, its universal banking solution, is installed at over 154 banks globally and 42 per cent of them rank in top 1,000 banks, according to its latest annual report. This shows the success of its efforts in creating a truly global product for a niche segment. Its expertise in creating product-based solutions can further be extended to other major verticals and industries where Infosys has the thorough understanding of processes and expertise to map clients' requirements to product platforms.
Recently, some steps have been taken to address the opportunity. The company has launched the products and platform services (PPS) division. It has created platform-based customizable solutions to cater to retail, human resources, payroll and other segments. Infosys ended FY12 with an order book of $350 million executable over the next four years.
The company needs to further intensify its focus on PPS as the division is yet to contribute significantly to the company's revenues. In the June 2012 quarter, it earned 6 per cent of its revenue from this segment, little changed from a year ago. A significant change in this trend requires greater commitment to research and development (R&D) efforts. The company spent a little over 2 per cent of its revenue on R&D in FY12 and a year before. Globally, product-centric technology companies tend to spend anywhere between 3 per cent and 10 per cent of their topline on R&D.
Employee engagement will play a crucial role in making the product-based strategy a grand success. Infosys, which has long been a preferred destination for the well-educated workforce in India, has of late seen a greater exodus of employees.
Unlike some of its bigger and smaller peers, Infosys is yet to report a major fall in the employee attrition rate. In the June 2012 quarter, it inched up to 14.9 per cent from 14.7 per cent a quarter ago. To reconnect with employees and realign mutual objectives amidst growing growth concerns should be a priority for Infosys.
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CA. Rajesh Desai
Rajesh Desai
Infosys' fourth quarter net profit rose 3 percent year-on-year (1 percent quarter-on-quarter) to Rs 2,394 crore, partly helped by higher other income and lower income tax expenses.
However, its revenue growth of Rs 10,454 crore, up 18 percent YoY (0.3 percent sequentially), was lower than what the street had forecast.
Analysts on average had expected the India's second largest software services exporter to report a net profit of Rs 2,297 crore, on revenue of Rs 10,730 crore, according to a CNBC-TV18 poll.
Infosys has guided for a full year revenue growth of 6-10 percent, which is also much lower than what the industry body NASSCOM has forecast. It has not provided earnings per share guidance for the full year.
09:13
Consolidated dollar revenue at $1938m Vs $1911m (QoQ)
09:11
Consolidated PAT at Rs 2394cr Vs Rs 2369cr (QoQ)
09:09
Infosys stock to correct by 8-10%: BofA ML
09:08
Balance sheet strong; cash equivalents at $4.4bn: Infy
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CA. Rajesh Desai
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CA. Rajesh Desai
Rajesh Desai
Press Releases
§ Infosys announces salary increments for fiscal year 2014
The Company today announced salary increments for all eligible employees, across the company, for fiscal year 2014. The company announced an average increase of 8% for employees based in India. Employees based in other geographies, who have not been covered by salary increases in February 2013, can look forward to an average increase of 3%. These increments will be effective July 1, 2013. The Global sales force will see an average increase of 8% which will be effective May 1, 2013.
http://www.infosys.com/newsroom/press-releases/Pages/infosys-announcement.aspx
Our View:
- The company announced an average salary hike of 8% for Global Sales force effective May 1st 2013 for FY14.
- The company also announced an average wage hike of 8% for India based employees and 3% for employees based in other geographies (who were not covered during February appraisal cycle) effective 1st July 2013.
- This wage hike is likely to have an impact of 300bps on margin on an annualised basis.
- Infosys’ operating margin will be further impacted by 180bps (US$140 mn) based on our calculations due to full year impact of wage hike given in FY13.
- The company had announced wage hike for offshore employees in October and onsite employees in February for FY13.
- Infosys had announced during Q4 to alter salary structure wherein the company is planning to increase fixed pay versus high variable pay currently. However, the management alluded that time that this alterations is likely to have minimal impact on margin.
- We believe that the announcement of wage hike is not a function of improvement in demand environment but it’s a function to tame the high quarterly annualized attrition (~20%) in past 4 quarters.
§ Pratik Gandhi (Pratik...@idbicapital.com, +91-22-4322 1367) is forecasting 7.8%/9.8% US$ revenue growth for FY14/FY15 respectively. Our current numbers are factoring 140bps/60bps impact on EBITDA margin to 27.2%/26.6% for FY14/FY15 respectively. We will review our numbers post Q1FY14 as we believe the impact of truncated salary hike (effective 11/9 months for sales/delivery team) will be partly offset by ~8% rupee depreciation recently. Hence we maintain our EPS estimates of Rs165/Rs179 for FY14/FY15 respectively. Maintain HOLD with a TP of Rs2,415.
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CA. Rajesh Desai
Rajesh Desai
REUTERS - The Securities and Exchange Board of India (SEBI) has sought details from Infosys, India's No. 2 software services exporter, about a board meeting held on the day founder N.R. Narayana Murthy was re-appointed to an executive role in the company.
Infosys did not disclose the nature of the information sought by the SEBI.
Market regulator SEBI routinely seeks clarifications from listed companies without citing reasons, and the requests for information are not necessarily an indication of an official investigation.
"SEBI has sought certain clarifications from us relating to the Board meeting held on June 1st and we have provided the same. We will fully co-operate with SEBI and provide all necessary information in this matter," Infosys said in the statement to Reuters on Friday.
Murthy returned to Infosys as executive chairman on June 1, eleven years after he was chief executive of the company, to help turn around the outsourcing services provider after two years of disappointing results.
Shares in Infosys had gained 3 percent on May 31, the day before Murthy's appointment and as the broader Nifty fell 2.3 percent. Volumes in call options in Infosys had also surged on that day, according to Thomson Reuters data.
Infosys had no immediate comment beyond the statement. A SEBI spokesman wasn't immediately available for comment.
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CA. Rajesh Desai