Infosys beats street estimates, Q3 net profit rises 23.7% Y-o-Y

In a seasonally weak quarter, Infosys beat street estimates to post a 23.7 per cent growth in net profit to ₹4,466 crore on a year-on-year basis on account of a weaker rupee, cost reductions and signing of large deals.

The IT major also increased its FY20 revenue guidance to 10-10.5 per cent in constant currency from 9 per cent and maintained its FY20 operating margin guidance range of 21-23 per cent.

“Strong digital revenues this quarter which contributed to 40.6 per cent of total revenues, operating margin at 21.9 per cent, a 0.2 per cent improvement over the previous quarter, voluntary attrition down to 15.6 per cent, large deal signings at $1.8 billion and a very strong free cash flow position were some of the highlights of this quarter,” said Salil Parekh, CEO and MD of Infosys.

While the net profit of the second-largest IT services company rose 10.6 per cent to ₹4,466 crore on a sequential basis, revenues grew 2 per cent to ₹23,092 crore for the same period. On a Y-o-Y basis, revenues grew 7.9 per cent.

Infosys’ other income grew 32 per cent on a sequential basis because of interest on income-tax refunds amounting to ₹242 crore for three-months ended December 31.

Improved margins

“This quarter, we were clearly able to see that we had the support from our clients to raise revenue guidance and several of our business segments are growing at double-digits already,” Parekh, who was cleared of the allegations against him made by a whistleblower group, said.

“Improvement in operating margins during the quarter was driven by relentless cost optimisation and operating leverage. Cash generation was extremely strong with cumulative free cash flow crossing $1.5 billion. Return on equity rose further to 25.9 per cent driven by margin expansion and increased shareholder payouts” said Nilanjan Roy, CFO, Infosys.

The digital revenues in constant currency grew 40.8 per cent ($1.3 billion) on a Y-o-Y basis. In dollar terms, revenues grew Y-o-Y 8.6 per cent and 9.5 per cent in constant currency. On a sequential basis, it grew 1 per cent.

The seasonal softness of the quarter, which is marked by furloughs and holidays, saw utilisation dip to 84.4 per cent this quarter from 84.9 per cent last quarter.

Annualised consolidated attrition went down to 19.6 per cent from 21.7 per cent last quarter due to multiple employee engagement measures. Infosys hired 12,000 this quarter, of which 7,000 were freshers and the rest laterals. Employee headcount stood at 2,43,454 at the end of December 2019.

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