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Infinite's results were in line with CRISIL Research's expectations. Revenues grew 6.9% q-o-q to US$63.0 mn from US$58.9 in Q1FY13 driven by strong revenue booking from the R-APDRP (Restructured-Accelerated Power Development Reforms Programme) project in Uttarakhand, India. In rupee terms, revenues grew 9% q-o-q to Rs 3,479 mn. Infinite continued to witness strong business momentum and bagged key deals with existing and new clients. The company also declared an interim dividend of Rs 6 per share. We maintain the fundamental grade of 3/5.
Minuscule decline in EBITDA margin; lower PAT margin due to forex loss
EBITDA margin declined by 14 bps q-o-q (down 22 bps y-o-y) to 16.7%. The 560 bps q-o-q decline in employee costs was offset by the increase in other expenses resulting in a slight dip in EBITDA margin. Other expenses increased due to costs related to the R-APDRP project. PAT margin declined 211 bps q-o-q (down 297 bps y-o-y) to 9.0% due to forex loss of Rs 83 mn in Q2FY13 compared to a forex gain of Rs 21 mn in the previous quarter. Of the Rs 83 mn forex loss, Rs 30 mn was on account of losses on forward contracts while the rest was due to translation losses. PAT decreased 11.7% q-o-q to Rs 312 mn.
EBITDA margin declined by 14 bps q-o-q (down 22 bps y-o-y) to 16.7%. The 560 bps q-o-q decline in employee costs was offset by the increase in other expenses resulting in a slight dip in EBITDA margin. Other expenses increased due to costs related to the R-APDRP project. PAT margin declined 211 bps q-o-q (down 297 bps y-o-y) to 9.0% due to forex loss of Rs 83 mn in Q2FY13 compared to a forex gain of Rs 21 mn in the previous quarter. Of the Rs 83 mn forex loss, Rs 30 mn was on account of losses on forward contracts while the rest was due to translation losses. PAT decreased 11.7% q-o-q to Rs 312 mn.
Continues to bag new deals; net addition of 320 employees
Infinite continued to build on the strong deal flow from the past quarter and bagged eight new deals in Q2FY13. The initial value of these deals (contracts with both existing and new clients) is US$1.5-2.5 mn. The company also signed master service agreements (MSAs) with six new clients which can potentially translate into key deals for the company. During the quarter, the company also launched its infrastructure management services (IMS) as a cloud based offering. In view of the strong deal flow, the company had a net addition of 320 employees in this quarter. The strong employee addition led to the utilisation level dipping to 88% from 90% in Q1FY13. However, attrition declined for the third consecutive quarter to 16.8% in Q2FY13.
Infinite continued to build on the strong deal flow from the past quarter and bagged eight new deals in Q2FY13. The initial value of these deals (contracts with both existing and new clients) is US$1.5-2.5 mn. The company also signed master service agreements (MSAs) with six new clients which can potentially translate into key deals for the company. During the quarter, the company also launched its infrastructure management services (IMS) as a cloud based offering. In view of the strong deal flow, the company had a net addition of 320 employees in this quarter. The strong employee addition led to the utilisation level dipping to 88% from 90% in Q1FY13. However, attrition declined for the third consecutive quarter to 16.8% in Q2FY13.
Dependence on the US market has increased
Infinite derived 79% of its revenues in this quarter from the US. Due to expiry of the BOT project with its European client, there was zero contribution from Europe. We expect Infinite's dependence on the US to increase even after the expiry of the R-APDRP project in India.
Infinite derived 79% of its revenues in this quarter from the US. Due to expiry of the BOT project with its European client, there was zero contribution from Europe. We expect Infinite's dependence on the US to increase even after the expiry of the R-APDRP project in India.
Valuations: Current market price has upside
Based on the upward revision in estimates, our discounted cash flow-based outstanding fair value estimate for Infinite is Rs 180 per share. At the current market price of Rs 141, the valuation grade is 5/5.
Based on the upward revision in estimates, our discounted cash flow-based outstanding fair value estimate for Infinite is Rs 180 per share. At the current market price of Rs 141, the valuation grade is 5/5.
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