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Has Infosys finally broken the shackles of being an underperformer and turned the corner? If the company’s December quarter numbers are anything to go by, it certainly is a good start.
Increase in volumes (person months billed), higher realisations, growth across verticals and healthy large-client additions in the quarter meant that Infosys exceeded market expectations handsomely. Significant rise in its package implementation and consulting practice’s contribution to revenues meant that the company has also been able to tap into the discretionary spends of clients as well. It was of course aided in the process by Lodestone, the company it acquired a few months back.
During the quarter, while revenues rose by 6.3 per cent sequentially in dollar terms (its best in 4-5 quarters), net profit was largely unchanged even as the company increased its wages for offshore employees.
Key parameters robust
Infosys witnessed a sequential increase of 2 per cent in volumes, while pricing was up 1.8 per cent. The increase in realisations has come about after two successive quarters of pricing declines.
Revenues from three of its key verticals – BFSI, Retail & Life Sciences and Energy, Utilities & Communications, grew at 6.4-7.8 per cent, indicating broad-based demand. Manufacturing too grew, though at a slower pace.
The company added a client under $100 million category, while adding 7 customers in the range of $60-$90 million.
Fixed price contracts, which ensure better realisations than time and material contracts, increased contribution to revenues.
Another key positive in the quarter has been a 16.6 per cent increase in revenues from the European geography, with Lodestone providing the necessary impetus.
Consulting and package implementation, an offering that commands higher billing rates and is more likely to include discretionary spends has grown at a pace faster than the company’s revenue rate. This could be indicative of Infosys being on the right track to tap increased spends of clients. Infosys has finally matched some of its peers such as TCS and HCL Technologies in growth across parameters and key financials. The fact that the company managed to beat market expectations with no specific one-offs aiding its results lends confidence. That said, sustainability is the key.
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