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Infosys kicked off the new fiscal by delivering numbers that met market expectations for the June quarter.
Significant improvement in volumes and utilisation, better traction in the US markets and growth in key segments such as manufacturing and retail were the highlights for the period.
Major concern
On the other hand, increasing attrition and lack of significant additions in large-size customers are concerns.
During the quarter, Infosys’ revenue grew 2 per cent sequentially in dollar terms, while net profits fell by a per cent, largely due to wage hikes given with effect from April.
Infosys witnessed an increase in volume (person months billed) to the tune of 2.9 per cent sequentially, one of its best in recent quarters. There has been a slight decline in realisations, though the management has indicated that pricing has been quite stable.
Utilisation was 80.1 per cent during the quarter, which is a substantial improvement from the mid-70 per cent levels that the company normally reports. These factors clearly indicate that the company has a fair degree of traction with clients and reasonable revenue visibility.
After a slow-down in the last couple of quarters, the US grew at a pace faster than the overall company’s revenue rate, at 3.7 per cent sequentially. Europe though witnessed a mild drop in revenues.
Verticals grow
All the verticals grew for Infosys during the quarter, with manufacturing and retail growing at 2.1-2.6 per cent. The BFSI segment too expanded, though at a slower pace.
The company witnessed significant traction in its traditional application services, as well as testing and infrastructure offering. Discretionary spends were not that forthcoming during the quarter.
Attrition, at 19.5 per cent, is a major cause for concern. It is among the highest in the industry. The company is seeking to address this through greater employee engagement, but has indicated that monetary aspect may not be used to stem the tide.
Customer addition of larger sizes has been disappointing, with only one customer added in the $50-million category. In the other larger buckets, no new additions have been made.
Infosys has made a reasonably good start to the new fiscal, though it needs to grow much faster to catch up with the industry rate of 13-14 per cent.
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