Infosys attrition rate jumps to 19.5% in Q1, concerns analysts

Infosys, India's third-largest IT exporter, opened the technology earnings calendar for the April-June quarter by reporting numbers that were in line with market expectations.

The company reported a net profit of Rs 2,886 crore for the quarter, or Rs 50.51 a share, down 3.5 per cent from Rs 2,992 crore, or Rs 52.36 a share, in the previous quarter. Dollar revenues inched up two per cent to $2.13 billion.

The company reported a stable business environment, added 61 clients and reported momentum in large deal wins during the quarter.

But its high attrition rate concerned analysts.

Infosys's attrition rate shot up to 19.5 per cent in the June quarter from 18.7 per cent in March. A year ago, the attrition rate was 16.9 per cent. The company had 161,284 employees as on June 30 - it added just 879 employees on a net basis since March.

"Employee attrition rates are worrisome and we are implementing various initiatives to retain good talent," Chief Operating Officer U.B. Pravin Rao said in a statement.

Analysts appeared more circumspect.

"Infosys's attrition rate is inching up every quarter. There is something structurally wrong with the company," said Sanjeev Hota, analyst with brokerage house Sharekhan.

Apart from the high attrition, the company's results met Hota's expectations. "Profits beat our expectations. The margins were a surprise. But we don't see any big re-rating in the Infosys stock. The company has to show at least two-three quarters of consistent performance," he added.

The company reported operating margin of 25.1 per cent. However, Chief Financial Officer Rajiv Bansal warned that margins can remain volatile in the near term because the company will need to make investments in the future to spur growth.

Infosys did not change its full year 2014/15 outlook - it expects dollar revenues to grow seven to nine per cent.

Infosys stock was trading at Rs 3,355 on the Bombay Stock Exchange at 1.33 pm, up 1.89 per cent. The BSE Sensex was down 106.89 points at 25,265.86.