Infosys reported USD revenue growth of 5.9%QoQ led by volume growth of 3.1%QoQ. It was tad disappointing because of lower volume growth (guidance for Q3 was 3.5-
4.5%QoQ, which was purely volume led) and hence lower EPS, and also due to muted outlook for Q4. We expect a strong revenue growth in FY12E, which is echoed by the management's broad outlook of 18-20%YoY USD revenue growth for FY12 at this point of time.

Muted Q3FY11 as compared to Q2FY11 - We expected this quarter to be slightly muted as compared to Q2FY11. Infosys revenues grew 2.3%QoQ to Rs71,060mn (PINCe Rs71,377mn). EBIT margins were flat at 30.2% despite rupee appreciation; margins were supported by higher realizations and offshoring. Pricing grew 1.6%QoQ. It raised its USD revenue guidance to
25-26%YoY growth (earlier 24-25%). EPS grew 2.5%QoQ to Rs31.2 (PINCe Rs31.2) led by marginally higher other income.

BFSI and manufacturing lead the pack; muted growth in US, ROW outperforms- BFSI dominated globally with increased spending on IT and grew 8.3%QoQ. Manufacturing and retail grew 9.9%QoQ and 6.7%QoQ respectively. US witnessed muted growth of 4.2%QoQ after large ramp ups in the last few quarters, India and ROW outperformed with
11%QoQ and 16.2%QoQ growth, respectively.

Persistent uptick in discretionary spend; high new client wins- This quarter too witnessed an uptick in discretionary spend led by application development, consulting & PI and product engineering which grew 5.9%QoQ, 6.4%QoQ and
10.2%QoQ, respectively. 40 new clients were added in Q3FY11.

Outlook - Strong employee addition, large deal pipeline and stable margins

Infosys is on track for its hiring guidance of 40,000(gross adds) in FY11. Highest lateral addition of 5,212 was recorded in this quarter. The company has given 26,000 campus offers for FY12. Deal pipeline is strong with large transformational programs. We expect EBIT margins to remain stable in the near term. We have introduced FY13E financials. We maintain our `BUY' recommendation with a target price of Rs3,750 based on 21xFY13E earnings.