Companies

Infosys second-quarter revenues up 3.8% to ₹22,629 cr

Our Bureau Bengaluru | Updated on October 11, 2019 Published on October 11, 2019

(from left) UB Pravin Rao, COO, Infosys; Salil Parekh, CEO and MD; and Nilanjan Roy, CFO, at a press conference to announce Q2 results at the Electronic City campus in Bengaluru, on Friday   -  GRN SOMASHEKAR

Company raises revenue growth guidance for FY2020 on the back of strong large-deal momentum

Infosys seems to have regained its mojo during the second quarter with the IT major revising its lower end of the guidance upwards on the back of huge deal momentum of $2.8 billion.

The country’s second-largest IT services company posted a 6.2 per cent growth on a sequential basis to ₹4,037 crore during the second quarter of this fiscal, while revenues grew 3.8 per cent to ₹22,629 crore during the same period.

On a year-on-year basis, net profit dipped a little by 1.8 per cent because of the increase in the cost of sales which went up by 13.5 per cent. Revenues for the same period grew 9.8 per cent. Employee benefit-cost and cost of technical sub-contractors were the major contributors to the increase in cost of sales. Operating margins were up 1.2 per cent to 21.7 per cent on a sequential basis.

The company revised the lower end of the guidance in constant currency to 9 per cent from 8.5 per cent earlier; but kept the higher end pegged at 10 per cent because of the traditionally weak quarters of Q3 and Q4 ahead. It also said that there was a robust demand in financial services, energy and utilities and high tech and telecom.

In dollar terms, net profit grew 4.7 per cent to $572 million, while revenues grew 2.5 per cent to $3.2 billion on a sequential basis.

Analysts’ take

Analysts cheered the results but pointed out that they were surprised by the fact that Infosys did not raise the guidance at the upper end despite the confidence of strong order book as well as the first half of FY20 revenue performance.

“Infosys Q2 results were broadly in-line with expectations as compared to the disappointment with TCS. A 3.3 per cent QoQ constant currency revenue growth with 120 basis points improvement in operating margins sequentially keeps faith alive on Infosys’ recovery through FY20,” Emkay Global Financial Services in a note to its investors said.

The company’s margins, too, expanded after five straight quarters largely because of high-margin digital deals and improvement in operational parameter and cost efficiencies. It maintained the FY20 operating margin guidance range of 21-23 per cent.

Digital revenues, as a percentage of total revenues, during the second quarter was 38.3 per cent compared with 35.7 per cent during the previous quarter. About $1.2 billion of revenues came from digital and $1.98 billion came from core.

In terms of geographical growth, Europe was a bit slow because of Brexit issues, while in terms of deal wins the total contract value was 75 per cent higher than the first half of the same period last year. Four of the deals were from financial services, four from retail CPG and logistics and two from communications and three from other verticals. Of these, six were from the US, five from Europe and two from the rest of the world.

Attrition

“Our performance was robust on multiple dimensions — revenue growth, digital growth, operating margins, operational efficiencies, large deal signings and reduction in attrition”, said Salil Parekh, CEO and MD. “All these are clear signs that we are progressing well in our journey of client-centricity and maximising value for our stakeholders.”

Voluntary attrition fell to below 18 per cent because of several employee engagement measures. Attrition on a standalone basis dropped to 19.4 per cent compared with 21.5 per cent on a sequential basis.

The company declared an interim dividend of ₹8 per share. Infosys shares rose 4 per cent to ₹815.70 on the BSE at the end of the trading session on Friday.

Published on October 11, 2019
  1. Comments will be moderated by The Hindu Business Line editorial team.
  2. Comments that are abusive, personal, incendiary or irrelevant cannot be published.
  3. Please write complete sentences. Do not type comments in all capital letters, or in all lower case letters, or using abbreviated text. (example: u cannot substitute for you, d is not 'the', n is not 'and').
  4. We may remove hyperlinks within comments.
  5. Please use a genuine email ID and provide your name, to avoid rejection.