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Informist, Thursday, Jul 18, 2024

 

By Anjana Therese Antony

 

MUMBAI - Information technology major Infosys Ltd surprised the Street today with an upward revision of its revenue growth guidance for 2024-25 (Apr-Mar), while analysts had expected it to retain the growth view of the previous financial year. "We started the financial year with a strong performance in Apr-Jun across multiple dimensions, including broad-based revenue growth, expansion in operating margin, strong large deal wins and strong cash generation," Chief Executive Officer Salil Parekh said in a post-earnings press conference. 

 

The Bengaluru-based company raised its revenue growth guidance for the current financial year to 3-4% in constant currency terms from 1-3%. The technology giant has kept the operating margin guidance of 20-22% for the current fiscal year unchanged, in line with what the Street had anticipated. The management said its margin expansion programme, Project Maximus, which was introduced last year, has started showing results. The company's operating margin expanded to 21.1% for Apr-Jun from 20.1% a quarter ago, which is also within the company's target of 20-22%. 

 

The company also plans to hire 15,000-20,000 freshers this year and said utilisation "looks fairly good". The hiring plan follows six consecutive quarters of decline in headcount. The IT company's total headcount declined by 1,908 employees in Apr-Jun, taking the total strength to 315,332 as of Jun 30. The voluntary attrition rate for the trailing 12 months rose to 12.7% from 12.6% in the previous quarter.

 

During Apr-Jun, the company said it had won 34 large deals, with a total contract value of $4.1 bln, adding that this is the highest number of number of deal wins in any quarter. Its active clients declined to 1,867, from 1,882 in Jan-Mar. "We continue to see strong traction from clients in generative AI (artificial intelligence) programs," the company said.

 

Meanwhile, clients' discretionary spending remains low compared to previous quarters, it said. Infosys, along with its other industry peers, saw weak financial performance for at least a year due to a fall in discretionary spending and unfavourable macroeconomic factors as well as demand trends. However, experts said that for IT players in India, the worst was behind them, and they expect better financial performance in the coming quarters.

 

For the June quarter, the company reported a nearly 20% sequential fall in its consolidated net profit to 63.68 bln rupees, which was slightly higher than analysts' estimate of 63.44 bln rupees. Its revenue grew nearly 4% sequentially to 393.15 bln rupees, higher than the Street's estimate of 389.95 bln rupees. Compared to the year-ago period, the topline increased 3.6% and the bottomline grew 7.1%.

 

The revenue growth of Infosys was higher than other IT peers that are part of the Nifty 50 index and have released their earnings so far. Its peer LTIMindtree Ltd reported a nearly 3% sequential growth in revenue, and that of Tata Consultancy Services Ltd rose 2.3% sequentially, while HCL Technologies Ltd's revenue fell 1.6%. 

 

VERTICALS, GEOGRAPHIES

While its core financial services segment saw a 0.3% on-year growth in constant currency terms, that of its next major vertical, retail, saw a 3?cline. "I'm particularly pleased with 7.9% growth in the financial services segment, where we have seen improvement in client spending in North America," Parekh said. 

 

Infosys' banking, financial services, and insurance segment turned positive in Apr-Jun after seeing weakness for six consecutive quarters. The company also said it is seeing improvement in the US financial sector. 

 

Further, the company said it sees growth in its manufacturing sector to be lower compared to last year, and that of the hi-tech segment may remain softer. Revenue from the manufacturing division grew 6% on year in constant currency terms during Apr-Jun and that of hi-tech rose 2.1%. 

 

When it comes to revenue from various geographies, North America saw a decline of 1.2% on year in constant currency terms, while that from Europe grew 9.1%. Revenue from India grew nearly 20% on year in constant currency terms. North America constitutes nearly 59% of total revenue and Europe over 28%, while India contributed a mere 3.1%. 

 

IN-TECH ACQUISITION
Infosys said its Germany-based arm Infosys Germany GmbH has completed the acquisition of in-tech Holding GmbH, which is a leading engineering research and development service provider. The acquisition was announced in April and the company had then said the stake would be acquired for 450 mln euros (around 41.08 bln rupees).  

 

"in-tech brings to Infosys, marquee German original equipment manufacturers (OEMs) deep client relationships, and an extensive industry expertise with a multidisciplinary team of 2,200 people across locations in Germany, Austria, China, UK, and nearshore locations in Czech Republic, Romania, Spain, and India," Infosys had said.

 

Today, shares of Infosys closed nearly 2% higher at 1,758.05 rupees on the National Stock Exchange. The company reported its earnings after market hours today.  End

 

US$1 = 83.65 rupees

 

Edited by Tanima Banerjee

 

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