Some deal ramp-ups and an uptick in the key vertical of financial services lifted profit and revenue, which rose 5.1% from the year earlier and 4.2% from the preceding quarter, to ₹40,986 crore.
This also led the Bengaluru-based firm to marginally revise upward its full-year revenue guidance to 3.75-4.50% in constant currency terms from 3-4% in July on the back of a market environment that has improved slightly.
This follows a prolonged slowdown in demand due to macroeconomic uncertainty and geopolitical tensions. Net profit rose 2.2% sequentially.The guidance change is the sixth consecutive quarterly revision and seventh in eight quarters. Infosys is seeing a “lot of traction in financial services, which has given us good growth last quarter and this quarter,” said chief executive officer Salil Parekh. “We see that continuing.”Financial services (FS) is the lar gest spender on technology and also the biggest contributor to the industry’s revenue. Parekh warned that other sectors are yet to start spending on discretionary or noncritical projects.
‘Focus More on Cost & Efficiency’
He said that most deals remain centred around driving cost efficiencies, a key indicator of stress in the economies of the developed world.
His views were echoed by Srinivas Pallia, CEO of cross-town rival Wipro, which also announced September quarter earnings on Thursday. India’s biggest software company Tata Consultancy Services (TCS) and the third largest, HCLTech, said last week during their earnings announcements that they see some signs of improvement, most notably in financial services in North America. However, Pallia emphasised that the “demand outlook continues to remain cautious”.
Infosys results are “in line to slight miss” at the operating level with a 3.1% quarteron-quarter (QoQ) revenue growth even as ebit margins were flat sequentially, said Manik Taneja, executive director for IT services, Axis Capital. “Note that Infosys’ revenue growth would have been supported by the In-Tech acquisition (contributing around 80 bps QoQ growth).”
Operating margins at 21.1% were flat sequentially and down marginally from 21.2% in the previous year. Margin band guidance was unchanged at 20-22% for the full year.
“We got 80 basis points (0.80%) of benefit from Project Maximus and 10 basis points (bps) from currency,” chief financial officer Jayesh Sanghrajka said. “That was off set by 30 basis points on account of acquisition and 60 basis points on account of the salary and the variable. So Project Maximus has been contributing, it’s offsetting the common premium and variable.”
Project Maximus refers to the company’s margin improvement programme that is aimed at optimising costs.
LARGE DEAL WINS
The company’s large deal wins stood at $2.4 billion total contract value (TCV), down from $4.1 billion in the June quarter and $7.7 billion in the year earlier. “Typically, large deals are much more lumpy — in some quarters there are a few more and some quarters a few less,” Parekh said. “Our focus really is making sure that if you look at all of H1, those are converted and are already into delivery mode. And we are seeing that coming through with the large deals. A lot more focus on cost and efficiency… Our less-than-$50-million deals have also increased double-digit this quarter.”
Growth continued to lag in North America, the company’s biggest region, shrinking 2.7% in constant currency terms from the previous quarter, while Europe picked up with 15.5% growth. India, which accounts for 3% of revenue, grew 16%. The board recommended an interim dividend of ₹21 per share, up 16.7% from last year. The record date was fixed at October 29 and November 8 as the payout day.
