In the three months ending March 31, 2007, Infosys’ net profit rose 70% to $259m, on sales that climbed 46% to $863m. The company’s operating profit margin was up slightly to 27.5% from 26.3% in the year-ago quarter.

In the full-year period, Infosys passed the $3bn revenue mark with sales increasing 44% to $3.1bn and net profit growing 46% to $863m.

Infosys added a gross total of 5,992 news staff during the quarter to take its total headcount to 72,241 employees. However, its attrition rate rose to 13.7% from 11.2% in the year-ago period, and the ability of firms such as Infosys to recruit and retain the best graduate and experienced talent is increasingly under the spotlight, as the competition for labor in India intensifies.

The company expects sales in the year ending March 2008 to surpass $4bn, which would rank it alongside major European and North American players such as LogicaCMG, BearingPoint and CGI Group.

However, it has lowered its earnings per share growth guidance for the same period down to between 25.7%, to 27.7% from last year’s 45%, mainly because a large number of employees have recently exercised their stock options, resulting in a bigger overall pool of listed shares.

Investors responded positively to the results, with Infosys’ shares up 2.2% on the Bombay Stock Exchange to IRP 2,088.

Our View

Yet more excellent results from one of the bellwethers of India’s services exporter community, but maybe we should not be so surprised as in overall terms, offshore sourcing has barely scratched the surface.

According to our parent company Datamonitor, spending on IT services reached $557bn in 2006, but Infosys and the four other largest Indian services suppliers – TCS, Wipro, Satyam and HCL – accounted for no more than 3% of this total combined.

Research out last month from accountancy firm Deloitte claimed that offshore technology spending by banks will increase from just 6% of their $44bn annual IT spending to a level of 30% by 2010. There is still a lot of room for expansion for Infosys which made 37% of its total fourth quarter sales from the financial services sector – and its peers.

The bread-and-butter of Infosys and its peers has been providing low-cost application maintenance and management services to Western businesses, but as this area becomes increasingly commoditized, there are further signs that Infosys is successfully ramping up in new growth areas such as infrastructure management and consulting.

Infosys made 4.3% of its fourth quarter sales from consulting, 7.3% from testing and 18.4% from package implementation, compared to comparative levels of 3.2%, 5.6% and 17.1% in the year-ago quarter.

The company is also reducing its reliance on the US, with Europe accounting for 26.6% of sales in the fourth fiscal quarter compared to 25.5% in the year-ago period.

Infosys’ numbers set the benchmark which the other big Indian vendors all of whom will report in the next fortnight must live up to.