Infosys fell short of Street expectations as it reported a 22.7 per cent growth in net profits for the quarter ended June 30, 2021, but raised revenue guidance for the full year on good deal wins and a strong order pipeline.
The country’s second largest IT services firm posted a net profit of Rs 5,195 crore against Rs 4,233 crore in the corresponding period of the previous year. Analysts were projecting a net profit of around Rs 5,400 crore.
Infosys raised its revenue guidance for this fiscal to 14-16 per cent from 12-14 per cent earlier. Analysts were expecting Infosys to raise the growth forecast to 13-15 per cent.
Infosys has benefited from enterprises spending more on activities such as cloud amid the pandemic and this was reflected in its topline .
“We have had a landmark first quarter with robust year-on-year growth of 16.9 per cent and a sequential growth of 4.8 per cent in constant currency terms. This has been the fastest growth we have seen in 10 years,” Infosys CEO Salil Parekh said at a conference call after the company announced the results.
In dollar terms, reported revenues came in line with estimates by growing 21.2 per cent at $3,782 million compared with $3,121 million in the same period of the previous year.
In rupee terms, revenues rose 17.9 per cent over April-June 2020 to Rs 27,896 crore from Rs 23,665 crore. Moreover, large deal wins (over $50 million in value) at $2.6 billion continued the momentum witnessed in the previous year.
Parekh said the company has continued to gain significant market share and the growth seen during the first quarter is largely organic in nature.
A key highlight was the digital business, which grew a strong 42 per cent over the year-ago period. It now contributes 53.9 per cent to Infosys’s revenues. “Growth was broad-based with seven industry segments reporting strong double-digit growth, including the two largest financial services and retail growing more than 20 per cent year-on-year,” Pravin Rao, Infosys chief operating officer, said.
Financial services saw a constant currency growth of 22.6 per cent, while it stood at 22.2 per cent for retail, 21.2 per cent in life sciences and 18.5 per cent in manufacturing. In terms of geographies, North America saw a growth of 21.1 per cent, Europe 12.2 per cent and India 20.7 per cent.
Parekh said pricing is also expected to remain stable during the year, though there could be an opportunity to drive higher pricing in digital.
“We have had a good start to the year with good deal wins and a strong pipeline. We can support the digital transformation approach that our clients are looking for. This gives us the confidence to increase the revenue growth guidance,’’ he added.
However, the quarter saw operating margins falling to 23.7 per cent from 24.5 per cent on a sequential basis.
Infosys will roll out salary hikes in July after a similar move earlier in the calendar year.
“As the demand for digital talent explodes, rising attrition in the industry poses a near-term challenge. We plan to expand our hiring programme of college graduates for 2021-22 to 35,000 globally,’’ Rao said.
During the quarter, attrition rose to 13.9 per cent from 10.9 per cent in the preceding quarter.