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Informist, Thursday, Jan. 16, 2025

 

 

--Infosys CEO: Financial services in US continue to grow strongly in Oct-Dec 

--Infosys CEO: Automotive sector in Europe continues to be slow 

--Infosys CFO: Saw positive growth trajectory in North America after 4 qtrs 

--Infosys CFO: Tailwind of 40 bps currency movement helped margin in Oct-Dec 

--Infosys CFO: Focus still on cost optimisation 

--Infosys CFO: See some recovery in discretionary spending in US 

--Infosys CEO: Pricing environment stable at this point of time 

--Infosys: Comfortable with 83-85% utilisation 

--Infosys: Additional third party revenue helped in Oct-Dec 

--Infosys: Sentiment towards US retail segment positive, deal pipeline strong 

--Infosys: See good traction in cloud, generative AI 

--Infosys: Confident about Jan-Mar; deal pipeline looks robust than before 

--Infosys: See revival in retail segment's growth in US 

 

 

By Anjana Therese Antony and Akshay V. Johnson

 

MUMBAI – Infosys Ltd. expects revival in its retail operations in the US, with the pressure on discretionary spending in the world's largest economy easing. "We are seeing an improvement in retail and consumer product industry in the US with discretionary pressures easing," Salil Parekh, chief executive officer and managing director of the company, said in a post-earnings conference call with analysts.

 

The Bengaluru-based company's revenue from retail operations in Oct-Dec grew only 0.1% on year in constant currency terms after falling 9.6% on year in Jul-Sept. Revenue from the retail vertical constitutes about 13.8% of the overall revenue of the company and is the third-largest income-generating vertical.

 

The management also said that discretionary spending of clients continues to be soft, though the environment is getting better than the previous quarters. Earlier, sharp cut in discretionary spending had hit the financial performance of Indian information technology companies, which was caused by high interest rates in the US and weak demand trends. 

 

The vertical saw strong growth during the quarter, a part of which was helped by some third-party deals, the management said. Infosys also said that there was a pickup in deal activity backed by improved consumer sentiment and strong holiday season sales, and this should "start reflecting in the volume in the next one or two quarters." The sentiment towards the retail vertical is positive and the deal pipeline is looking strong, it said.

 

The IT giant is also confident about its performance for the March quarter and said that its overall deal pipeline is looking more robust than before. In Oct-Dec, Infosys' large deal total contract value was $2.5 billion, higher than the $2.4 billion it posted in the previous quarter. 

 

While the retail segment is slowly seeing traction in discretionary spending, the company's biggest segment--financial services--continues to see higher discretionary spending from the US. "Clients have started to view IT investments more favourably post-election-related uncertainty and interest rate cuts in recent months," the management said. This vertical accounted for nearly 28% of the company's overall revenue and saw a 6.1% on-year growth in constant currency. 

 

Infosys said it signed five large deals in financial services, four in communications, and three in manufacturing. The financial services operations in Europe saw a revival during the December quarter, backed by some large deals, but the automotive sector continues to be slow in this region, it said. Infosys signed six large deals in Europe and 11 in North America. "North America returned to a positive growth trajectory after four quarters, growing at 4.8% (on year in constant currency terms)," the company said. Revenue from North America accounts for more than half of Infosys' overall revenue, with a revenue contribution of 58.4% during Oct-Dec.

 

The IT giant also expects good traction in cloud and generative artificial intelligence-related projects. "We are deepening our enterprise AI capabilities... We're working closely with a generative AI partner ecosystem to develop joint solutions for our clients, several of them on the platforms of the partners," Parekh said.

 

For the quarter ended December, the company posted a 4.6% sequential growth in its consolidated net profit to INR 68.06 billion and revenue rose 1.9% to INR 417.64 billion, both parameters beating the Street's estimates. The company also raised its revenue growth guidance for the current financial year to 4.5-5.0% from 3.75-4.50?rlier, while retaining its 20-22% margin guidance for the eighth time.

 

The company said about a 40 bps currency-movement tailwind helped the operating margin growth in Oct-Dec. Operating margin, calculated as earnings before interest and tax margin, rose 80 bps on year to 21.3%. The rupee saw a major fall since December and crossed 86 a dollar for the first time in January. The company continues to focus on cost optimisation measures, which also helped in the margin growth. Depreciation of the rupee benefits sectors such as IT, which earn most of their revenue in dollars.

 

Infosys said the pricing environment is stable and that it is comfortable with 83-85% of employee utilisation. In Oct-Dec, the company's utilisation, excluding trainees, rose slightly to 86% from 85.9% a quarter ago.

 

The company announced its earnings after market hours on Thursday and its shares closed 1.1% lower at INR 1,928.45 on the National Stock Exchange. Despite the robust financial performance, the American depositary receipts of Infosys were down 5.9% at $21.54 at 2118 IST.  End

 

US$1 = INR 86.55

IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT

 

Edited by Ashish Shirke

 

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