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The ghost of the Panaya acquisition continues to haunt Infosys, clearly affecting its profitability for the June quarter, though there was some cheer for the shareholders with the IT major announcing a 1:1 bonus.
India’s second-largest software exporter recorded a ₹270-crore fall in the fair value of Panaya. This resulted in a 2.1 per cent reduction in net profit to ₹3,612 crore on a sequential basis, with a consequent decrease in basic earnings per equity share by $0.02.
On a year-on-year basis, however, the net profit grew 3.7 per cent.
Infosys retained its annual revenue guidance of 6-8 per cent, in spite of the rupee depreciating 5 per cent. Revenue for the quarter came in at ₹19,128 crore, registering a 12 per cent year-on-year increase, and a 5.8 per cent sequential growth.
EBIDTA for the quarter stood at ₹4,703 crore, registering a 3.1 per cent yearly growth, but declined by 2.3 per cent on a sequential basis due to wage hikes and sales-related investments. Revenue for the quarter was led by growth in retail (up 6.4 per cent Q-o-Q), and energy verticals (up 5.3 per cent).
Not fast enough
The company’s momentum on digital revenues continued steadily, but is not growing fast enough, according to analysts. During the quarter, the digital revenue stood at $803 million or 28.4 per cent of total revenues, a sequential growth of 8 per cent and year-on-year growth of 25.6 per cent in constant currency terms.
In comparison, TCS’ digital revenues grew 44 per cent on a yearly basis. There was some concern with respect to financial services’ revenues as the company had placed big bets on its growth; however, on a sequential basis, it reported a decline to 32.6 per cent from 31.8 per cent and from 33 per cent on a year on year basis.
“Right now, they are meeting customer expectations but not exceeding them,” said DD Mishra, Principal Analyst, Gartner. Overall, the numbers were in line with analysts’ expectations. “Infosys has done well but has not been beating the street expectations, which are reasonable,” said Urmil Shah, research analyst, IDBI Capital.
Both attrition and new additions increased, which is a cause for worry as higher attrition usually results in a thinner buffer. The number of employees rose to 2,09,905, up from 2,04,107, and attrition grew to 23 per cent from 19.5 per cent on a sequential basis.
During the quarter, Infosys added four clients in the $100-million category, taking the number of clients in this category to 24.
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