Info-tech

Infosys delivers broad-based growth across segments

K.Venkatasubramanian BL Research Bureau | Updated on March 12, 2018 Published on October 10, 2014

The lone sore point during the quarter was the stubbornly high attrition rate

Even as the broader market is down, Infosys is trading 6 per cent higher, buoyed by its earnings announcement. In a seasonally strong quarter, Infosys has delivered an all-round performance and beat market estimates for the September period.

Healthy large-sized client additions, growth across key geographies and traction in key verticals were the positives for the company during the quarter. Volumes and utilisation were also robust.

The lone sore point during the quarter was the stubbornly high attrition rate.

In the September quarter, Infosys’ revenues grew 3.1 per cent sequentially in dollar terms, while net profit was up 6 per cent. On both counts the numbers were ahead of market expectations. Volume (person months billed) growth, at 3 per cent, was the highest in recent quarters, while utilisation rates improved significantly to 82.3 per cent levels. These factors indicate that the company has derived strong financial performance by driving up operating parameters.

All-round performance:

All the verticals grew during the quarter with key segments such as manufacturing, energy and utilities and telecom growing faster than the company rate, at 3.6-7.8 per cent.

Both North America and Europe expanded at a healthy pace of 3.1-4.2 per cent.

The company’s regular application services as well as consulting & package implementation offering grew indicating that Infosys has managed to tap regular as well as discretionary spends of clients well.

Growth has thus been balanced and broad-based across parameters for the company.

Infosys added one client in the $100 million category, three in the $75 million bucket and five more in the $25 million group. These indicate robust client-mining efforts during the quarter.

Attrition, at over 20 per cent, though continues to climb to uncomfortably high levels for the company, and has been much higher than tier-1 peers for a while now. The high attrition rate indicates that the churn of personnel is yet to subside.

Maintains guidance:

Infosys has managed to latch on to a generally favourable quarter for IT companies and drive strong all-round growth.

But despite the performance, the company has still stuck to its revenue growth guidance of 7-9 per cent in dollar terms for FY15. This suggests either the old strategy of the company to ‘under-promise and over-deliver’ or that Infosys isn’t expecting this quarter’s performance to be replicated for the rest of the year, at least not at the same magnitude.

The stock continues to trade at a significant discount to TCS. In the near term, the quarterly performance and a bonus issue of stocks can play positively on sentiments, though it may not be enough to bridge the premium that TCS commands.

Published on October 10, 2014
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