Infosys forecast offers comfort
A day after rival TCS disappointed the Street, Infosys on Friday reported profits in line with estimates and raised the lower end of its guidance, indicating an optimistic outlook for the rest of the year.
The Bangalore-based company posted a net profit of Rs 4,037 crore for the July-September quarter — a sequential growth of 6.2 per cent — though it was lower than Rs 4,110 crore in the same period of the previous fiscal.
More importantly, Infosys raised the lower end of the revenue guidance for the 2019-20 financial year. The revised guidance is a growth rate of 9-10 per cent in constant currency against the earlier forecast of 8.5-10 per cent growth.
Revenue during the quarter grew 9.8 per cent to Rs 22,629 crore over Rs 20,609 crore last year. However, in constant currency terms, the revenue rose 3.3 per cent, higher than the 1.6 per cent declared by TCS.
Margins, too, jumped 120 basis points over the preceding quarter to 21.7 per cent.
According to Nilanjan Roy, CFO, Infosys, the expansion in operating margins during the period was driven by improvement in operational parameters and cost efficiencies.
“Our performance was robust on multiple dimensions — revenue growth, digital growth, operating margins, operational efficiencies, large deals and reduction in attrition. All these are clear signs that we are progressing well in our journey of client-centricity and maximising value for our stakeholders,” Infosys CEO and MD Salil Parekh said on the results.
Brokerage Emkay Global Financial Services said it was surprised that Infosys had not raised the upper end of its revenue forecast despite strong order bookings and sales performance in the first half of the year.
“Infosys’s results were broadly in line with expectations compared with the disappointment with TCS. A 3.3-per-cent quarter-on-quarter constant currency revenue growth with a 120-basis-point improvement in operating margins sequentially keeps the faith alive on Infosys’s recovery through 2019-20,” the brokerage said.
Infosys won deals worth $2.8 billion in the quarter even as it continued to post strong traction in the digital segment where revenues rose over 38 per cent year-on-year to $1,230 million. Revenue from digital offerings totalled 38.3 per cent of Infosys’ overall sales in the quarter.
To a query on how the rest of the year would pan out, Parekh said, “Seasonally, the second half is generally weak in our sector. However, our overall deal pipeline is strong. We are confident of how clients are looking at the digital transformation capabilities that we are providing. The only caveat is the European market and some segments such as the capital markets and manufacturing.”
At its board meeting on Friday, the directors declared an interim dividend of Rs 8 per share.