IT major Infosys has reported a 3.2 per cent year-on-year(YoY) rise in net profit at ₹5,360 crore for the quarter ended June 30, missing the street expectations by a tad. On a sequential basis, the profits were down 5.7 per cent from ₹5,686 crore in the last quarter. 

Revenue from operations stood at ₹34,470 crore, a 23.6 per cent increase YoY. On a quarter-on-quarter (QoQ) basis, the revenues increased by 6.7 per cent from ₹32,276 crore, last quarter. In constant currency terms, its revenue rose by 21.4 per cent YoY and 5.5 per cent QoQ.

Fall in operating margins

The management attributed the fall in profits to the decline in operating margins brought on by higher wage hikes provided both on-site and off-shore,this quarter. The operating margin for the quarter was 20.1 per cent, a decline of 3.6 per cent YoY and decline of 1.4 per cent QoQ. 

“Our strong overall performance in Q1 amidst an uncertain economic environment is a testament to our innate resilience as an organization, our industry-leading digital capabilities and continued client-relevance. We continue to gain market share and see a significant pipeline driven by our Cobalt cloud capabilities and differentiated digital value proposition,” said Salil Parekh, CEO and MD. 

Attrition rate up

The growth was broad based across business segments, service lines and geographies. Digital accounted for 61 per cent of total revenues, a YoY growth of 37.5 per cent in constant currency terms. Deal wins for the quarter stood at $1.7 billion in contrast with  $2.3 billion previous quarter. However, the attrition rate increased to 28.4 per cent this quarter from 27.7 per cent in the previous quarter. 

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Nilanjan Roy, Chief Financial Officer, said, “We are fueling the strong growth momentum with strategic investments in talent through hiring and competitive compensation revisions. While this will impact margins in the immediate term, it is expected to reduce attrition levels and position us well for future growth. We continue to optimise various cost levers to drive efficiency in operations.”

Infosys has raised full-year FY23 revenue guidance to 14-16 per cent from 13-15 per cent stated previously. The margin guidance, however, has been retained at 21-23 per cent. 

Omkar Tanksale, research analyst, Axis Securities, told BusinessLine, “Despite all the headwinds the firm is playing positive and it’s a sign of relief. The decline in margin is not a major cause of worry as it’s an issue faced across industry.” The raising of guidance by the firm eliminates the threat of a potential slowdown, he added.