Infosys reported steady growth and beat its guidance in fiscal 2019, but sacrificed margins for the fourth straight quarter and gave a conservative guidance.

India’s second largest software exporter gave a guidance of 7.5-9.5 per cent in constant currency for fiscal 2020.

The IT major’s net profit in FY19 stood at ₹15,404 crore, down 3.9 per cent from the ₹16,029 crore recorded in FY18. The fall in profit was attributed to the adjustment for expenses incurred as a result of write-downs in its subsidiaries such as Panaya, Skava and DWA Nova, some of which was carried over from FY18.

Salil Parekh, who completed his first year as CEO, assured that the overall business is more stable and Infosys is better positioned in its digital business. When Parekh took over, he outlined a three-year strategy for the company — in the first year it was about stability, and then followed by building momentum and finally accelerating the business.

In the first year under Parekh, Infosys bagged total contracts worth $6.28 billion; in the fourth quarter it won contracts worth $1.57 billion.

While the guidance was seen mostly in line with what the market expected, analysts gave a thumbs down to the operating margins, which stood at 21.5 per cent in the fourth quarter, a dip of 100 basis points (1 per cent). New CFO Nilanjan Roy said the reason for the dip in margins is due to continued investments made in hiring in the US, re-skilling as well as hiring digital talent. For the whole year, margins came in at 22.8 per cent, in line with its 22-24 per cent guidance it had given in the start of the fiscal.

Sanjeev Hota, AVP Research at Sharekhan, said that it was a mixed performance, with marginal improvement in revenues and a miss in margins.

Harit Shah, Senior Analyst, Reliance Securities, said that while the deal wins were healthy, revenues from the financial services and retail sectors were poor. However, Infosys COO Pravin Rao said that out of the 13 large deals won, three were in financial services sector.

March quarter net up 10%

For the March-ended quarter, Infosys posted a net profit of ₹4,078 crore, a 10.5 per cent growth over the ₹3,690 crore posted in the year-ago period. Revenues came in at ₹21,539 crore, a 19.1 per cent increase when compared to ₹18,083 crore in the same period.

Infosys also continued to battle attrition, which was 20.4 per cent, some that analysts considered as a negative. Rao said that various initiatives such as milestone-based incentives and more career opportunities are being given to employees and the aim is to being attrition down to 13-15 per cent levels.

Related Topics
comment COMMENT NOW