Infosys may post higher net despite Re swings

Information technology bellwether, Infosys, will most likely weather the impact of adverse cross currency movements in the March 2010 quarter and is expected to report a higher sequential growth in revenue and net profit compared with the previous quarter.

The country’s second-biggest IT exporter will declare its fourth quarter results on Tuesday. According to an average of analyst estimates, Infosys is expected to report Rs 5,928.7 crore in revenue. This reflects a sequential growth of 3.3%, marginally greater than the 2.8% rise seen in the previous quarter.

Net profit is expected to increase by similar percentage points to Rs 1,633.4 crore. It had grown at a lower pace of 2.7% in the prior quarter. Analysts expect a strong 4-6% growth in business volumes measured in terms of quarterly billable man-hours.

The company may report 30-50 basis points (bps) fall in operating margin due to the currency impact. The dollar has appreciated sequentially by close to 8% against the pound and the euro during the quarter, whereas the rupee has strengthened by 1.5% vis-à-vis the dollar. Another important factor to look forward to is the company’s FY11 guidance.

The demand in major verticals, including banking, financial services, and insurance (BFSI), is gradually picking up. Also, budget spends on discretionary projects are likely to resume after a lull of over six quarters. The street expects Infosys to guide for 11% revenue growth on the most conservative side and 16% on the most optimistic side in dollar terms.

Any number above this threshold will be a pleasant surprise for the market. Infosys has given special dividends on three occasions in the past — in 2004, 2006, and 2008 of Rs 100, Rs 30 and Rs 20, respectively. Given the huge liquid assets of more than Rs 14,000 crore on its balance sheet, investors may be expecting an announcement of a windfall gain this year as well.