Infosys Ltd. met its revenue and margin guidance for the ongoing fiscal, buoyed by large deal wins and increased client appetite for spending on technology as businesses moved online during the pandemic. But revenue growth for the quarter ended March came in at 2%, below street estimates, whereas margin and net profit contracted sequentially. The company also announced a buyback.
The Bengaluru-based technology services company expects revenue buoyancy to continue and has estimated growth of 12-14% in constant currency terms for the upcoming financial year. The operating margin is forecast to be in the range of 22-24%, lower than the 24.5% upper end of FY21.
Revenue of India’s second-largest software services provider rose 1.5% over the preceding quarter to Rs 26,311 crore in the quarter ended March, according to its exchange filing. That compares with the Rs 26,510-crore consensus estimate of analysts tracked by Bloomberg.
Q4 revenue in U.S. Dollar terms rose 2.8% quarter on quarter to $3,613 million.
Whereas, revenue growth in constant currency terms stood at 2% for the quarter ended March (sequential growth) and at 5% for FY21.
Q4 Highlights (QoQ)
- Net profit fell 2.3% to Rs 5,078 crore, against the Rs 5,171-crore forecast.
- Operating income or Ebit fell 2.3% to Rs 6,440 crore. The consensus estimate for the same stood at Rs 6,532 crore.
- Ebit margin fell 90 basis points to 24.5% against 25.4% owing to wage hikes and cross-currency headwinds. On the margin front, CFO Nilanjan Roy said that the company will be undertaking another round of salary hikes in July after having taken one in January this year. “Coupled with return to travel and marketing costs, our guidance is still higher than that in FY20,” he said.
- The company crossed a revenue milestone of Rs 1 lakh crore in FY21.
Infosys COO UB Pravin Rao during the company’s press conference said that although there is some volatility in large deals, overall deal wins are at an all-time high.
Deal wins for FY21 stood at a record $14.1 billion. For the quarter, the company won deals worth $2.1 billion. “A strong momentum exiting FY21, alongside a focused strategy to accelerate client digital journeys, gives us confidence for a stronger FY22,” Managing Director and Chief Executive Officer Salil Parekh said in a statement.
66% of the deal wins in FY21 were net new deals, according to Rao. The number during the fourth quarter stood at 54%.
Other highlights for the quarter:
- Digital formed 51.5% of the total revenue.
- Attrition for the quarter stood at 15.2% as compared to 10% in December.
- Added 32 new $100 million+ clients during the quarter as against 29 in December.
- North America continues to contribute 61.6% to the company’s overall revenue.
- Board approved dividend of Rs 15 per share.
Shares of Infosys closed 1.91% lower on April 12, a day before the earnings were announced, compared with a 14% jump in the benchmark S&P BSE Sensex. Markets remained closed on April 13 on account of Ambedkar Jayanti.