Quick Analysis: Infosys dollar guidance raised; rupee spoils party

Net sales above expectations; profit at the higher end; dollar guidance raised, but rupee guidance stagnant at the upper end due to appreciation


  • Net sales (INR): Rs69.5 billion (expected range Rs66.1 billion-Rs68.4 billion)
  • Net sales ($): $1.5 billion (expected range $1.44 billion-$1.48 billion)
  •  Net profit: Rs17.4 billion (expected range Rs16.8 billion-Rs17.6 billion)

    Revised guidance:
  • FY11 sales: Rs264.4 billion-Rs268.9 billion (vs. Rs 264.4 billion-Rs268.8 billion earlier) or $5.95 billion-$6 billion (vs. $5.72 billion-$5.81 billion)
  •  FY11 EPS: Rs115-Rs117 (vs. Rs112-Rs117 earlier)


  • December quarter guidance at 4.4% q-o-q dollar revenue growth (in line)
  • FY11 margins could fall 250-260 bps on rupee and tax outgo but EBIT margins were ahead of consensus, up 190bps q-o-q to 30%
  •  The fact that the rupee guidance at the higher end is unchanged was a dampener
  • The raised dollar guidance was higher than expected
  • Special dividend of Rs30 and interim dividend of Rs10, taking the total to Rs40
  • Utilisation higher at 74% (including trainees); added 7,646 employees; Q2 attrition at 4,300 = 17% from 16% last quarter; to hire 11,000 employees in Q3; no significant hike in salaries; FY11 gross hiring target upped to 40,000
  • Said manufacturing has picked up in the US and Europe; Wi-MAX space is still sluggish; UK continues to be stable with a robust pipeline; sees telecom picking up from January
  • Energy, utilities revs up 6.3%, manufacturing up 19% vs. 19.5%, BFSI up 35% vs. 36%, retail up 14.4% vs. 13%
  •  BPO to contribute $400 million-$420 million in FY11
  • Volume growth was 7.2% in Q2, 7.6% in Q1
  • Infosys believes people will take a very short-term view on budgets. Will probably look at a quarterly budget rather than yearly.

In the September quarter, its promoter shareholding was steady at 16%; FII shareholding was marginally down at 35.8% from 36.5% in September 2009 and was steady from 35.8% in June 2010; DII share came down to 7.95% (8.6%, 8.2%). Infosys shares were down after hitting a new high in early trade.

(This article is based on secondary research. The report is for information only. None of the stock information, data and company information presented herein constitutes a recommendation or solicitation of any offer to buy or sell any securities. Investors must do their own research and due diligence before acting on any security. Some of the opinions expressed in this article are the author's own and may not necessarily represent those of Moneylife).


WPI Inflation up at 8.62% in Sept; RBI may hike policy rates

New Delhi: Driven by higher prices of essential items, inflation moved up to 8.62% in September, with experts saying that it will prompt the Reserve Bank of India (RBI) RBI to hike its short-term lending and borrowing rates at next month's policy review, reports PTI.

However, this is the second consecutive month in which the overall inflation has stayed in single-digits. It had remained over 10% for five months till July.

Inflation was 8.51% in August. The July figure, meanwhile, has been revised upwards to 10.31% from provisional estimate of 9.97%.

Besides, food inflation numbers released by the government today showed a marginal increase of 0.13 percentage points to 16.37% for the week ended 2nd October on higher prices of vegetables and milk.

Finance minister Pranab Mukherjee has expressed concern over the rising prices, saying that managing inflation has been one of his biggest challenges.

The overall inflation numbers for September showed prices of primary articles (those found in raw form) - food, non-food articles and minerals - shot up by 17.45% on an annual basis.

Meanwhile, chief economic advisor Kaushik Basu has exuded confidence that inflation will moderate to 6% by March end. "Inflation is virtually holding constant between 8.5%-8.6%... for the first time both the core CPI and the WPI are in single digits...Hopeful of year-end estimate holding at 6%," he told reporters here.

Experts said they expect another 25 basis points hike in short term rates, when RBI comes out with its second quarter policy review on 2nd November.

However, the Reserve Bank governor D Subbarao said in Chandigarh that the central bank would study the inflation data before deciding on further policy actions.

"We will study the de-segregate inflation data in the monetary policy review next month. Inflation figure would be one of the variables to be looked at during the review. I cannot speculate the stance of monetary policy," Mr Subbarao said, when asked about the RBI's further rate hike action.

In a bid to curb consumer spending, the RBI has raised interest rates five times this year to tame rising prices.

HDFC Bank chief economist Abheek Barua said, "We expect another 25 bps hike in repo and reverse repo and after that RBI will pause its rate hike cycle. The rate of rise in prices is coming down gradually

The government has maintained that inflation would come down to about 6% by the end of this fiscal.

Mr Mukherjee has said, "One of my biggest challenges is to control inflation but at the same time, I should not stand in the way of higher growth trajectory...I would not say I have failed. I have been able to reduce it from the peak it reached in December 2009 which it was as high as 20%. Now it has been brought down to 16%."

Meanwhile, the inflation data shows that on an annual basis, vegetables became dearer by 6.03%, fruits by 12.03% and milk by 24% in September. Further cereal prices rose by 6.24% and pulses increased by 5.07%.

Even on month-to-month basis, onion prices surged by 16.21%.

"Food inflation is driving the overall inflation numbers. Although prices of cereals and pulses are easing because of good monsoon, vegetables continue to increase because of seasonal effect," Crisil chief economist D K Joshi said.

This is evident also from the fact that manufactured items did not show as much rise as raw food items. Even food products in manufactured category were up just 2.80% in September. In fact, sugar prices declined by 4.36%.

However, textiles prices are showing upward tendency.

While cotton textiles turned dearer by 14.92% in September year-on-year, man-made textiles prices were up 9.36%. Inflation in prices of manufactured items is easing, even as pressure on food items remain.


Will Aakrosh meet the same fate as Crook and Lamhaa?

Failure of social-theme based films such as Crook or Lamhaa has not deterred producers from making movies on such subjects; experts say the script and power to captivate the audience holds the key for the success of any movie on any subject

Have Indian audiences had their fill of flicks that harp on social issues? Do they have moral sermonising coming out of their ears?

When Ajay Devgn and Akshaye Khanna join forces today to crack a missing case in their film, Aakrosh, promoted as a movie based on honour killings in India, it will pose a few uncomfortable questions to filmmakers on whether they are going overboard in using social issues as their theme to sell such films.

The success of films such as Jannat (based on match-fixing); Rang De Basanti (based on MiG-21 crashes), and to some extent 3Idiots (taking on the education system in India), has made filmmakers to fall back on social issues instead of focussing on the broader aspect of captivating the audience and keeping them entertained for the two to three gruelling hours of constant watching.

If the direction and performance in Lamhaa, starring Sanjay Dutt and Bipasha Basu, got rave reviews, the same can't be said about its box-office collections. Contrarily, Crook, based on racist attacks on Indians in Australia, had all the ingredients of a masala flick, but it too bombed, maybe because it failed to give justice to the subject.

Piyush Pandey, executive chairman and national creative director of Ogilvy India, said, "Though I haven't seen both the movies (Lamhaa and Crook), it won't be fair for me to comment on them. But if I had to generalise, anyone who holds the story together and captivates the audience will click. To take up current subjects is a good idea; but just taking up the subject is not good enough, you have to put the story together. The basic philosophy for any movie to be a success is a tight script on any subject it deals in."

Illustrating the philosophy of captivating an audience with storytelling for a film to be a success, Mr Pandey said, "Entertainment is not the only thing. Anand was not only about entertainment. But it was captivating; it kept you sitting on your seat and wanting to know what happens next. That is the most important aspect for any form of storytelling - whether it is a movie or a story I'm telling a child, you have to hold the interest."

In the context of 3Idiots, the film managed to strike a balance between preaching and entertaining the masses. In order to express the importance of studying with understanding rather than simply mugging up notes to get marks, the film tickled the funny bone by taking a dig at Chatur Ramalingam, who spoke "balatkar" instead of "chamatkar" and "stan" instead of "dhan", as he simply memorised his speech on Teacher's Day.

Even in Munnabhai MBBS, which is a satirical take on the work of doctors in India, the film drives home a message and entertains the audience as well. Rajkumar Hirani, the director of themovie,told Moneylife inarecent interview, "I had always felt that the audience should not get bored. Every scene has to have a beginning, middle, and end and be complete in itself - it must also be entertaining, not in the sense that it must make you laugh all the time, but it should make a point, keep you engrossed or evoke an emotion."

Now, the big question this week, is whether Aakrosh will manage to bridge the gap of exposing honour killings at its worst - albeit in a genre that will thrill and entertain the audience.

Kumar Mangat Pathak, producer of Aakrosh, told Moneylife that he is "confident" about the success of the film as it is packaged more as an action thriller. He said, "In the case of Crook, not even more than 1% of Indians were aware of the problems of racism in Australia. But honour killings are a big issue in India. It is reported daily in newspapers. We discuss it everyday. Priyadarshan is a very good director and he has made the film in a very entertaining way. It's basically an action thriller. We are expecting revenue of Rs 40crore plus from all-over-the-world collections."

But aren't filmmakers forgetting that it's the audience which is the big boss here? Do they need more hectoring? Let's pass the baton to them.



shahbaz yousaf

6 years ago

aakrosh is an outstanding film well produced,directed and acted by ajay and akshay the only let down is the music


6 years ago

its a good trend & a good way to make people aware of the issues faced. But knowing our masses one canoot expect a change in the system .Even if the audiences are engrossed for 3 hrs & feel strongly about the issue its a win for the filmmaker

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