Infosys Q4 profit falls 2.8% to Rs3,603 crore, guidance lower for FY18

Bengaluru: Infosys Ltd reported a subdued set of fourth quarter earnings on Thursday. It reported a 0.7% rise in dollar revenue in the January-March period even as India’s second-largest software firm estimates its dollar revenue to grow between 6.1% and 8.1% in the financial year 2017-18.

In rupee terms, revenue declined sequentially by 0.9% to Rs17,120 crore, while net profit declined 2.8% to Rs3,603 crore in the January-March quarter.

Bengaluru-based Infosys’s forecast of 6.1% and 8.1% in the current financial year is lower than that of rival Nasdaq-listed Cognizant Technology Solutions Corp., which expects to grow between 8% and 10%. Cognizant follows a January-December financial year.

In constant currency terms, Infosys now expects to grow between 6.5% and 8.5% for the full year. Infosys said on Thursday that revenue for the three-month ended 31 March rose to $2.57 billion from $2.55 billion in the preceding quarter. In constant currency terms, the company did not report any growth in revenue sequentially.

Net profit declined 0.8% to $543 million from $547 million in the October-December period.

Bloomberg survey of 34 analysts estimated Infosys to report revenue of $2.68 billion, or Rs17,283.7 crore, in the quarter. The analysts estimated the company to report a net profit of $554.4 million, or Rs3,564.1 crore, in the period.

“Unanticipated execution challenges and distractions in a seasonally soft quarter affected our overall performance,” said Vishal Sikka, chief executive officer of Infosys. “At the same time, we continued to see many positive signs of our strategy execution; our software led offerings continued to show strong momentum and client success, with continued adoption of Mana, our AI platform; Zero Distance marked its 2-year anniversary as a grassroots cultural movement for innovation with strong client resonance, and our employee engagement continued to drive down attrition, especially with top performers,” he said.

Worryingly for the company, the management estimates its Ebit (earnings before interest and tax) margin to be between 23% and 25% in financial year 2018, lower than the 24-26% band maintained over the last few years. This suggests that the company is seeing pricing pressure for commoditized deals.

Infosys reported a 7.4% growth to end with $10.2 billion in revenue in the year ended March, adding $707 million in incremental revenue, much lower than the 9.1% growth in 2015-16 when it did $790 million in new business.

Although Infosys will grow faster than both Tata Consultancy Services Ltd and Wipro Ltd, Infosys’s growth is slower than the 8.7% growth reported by Cognizant in 2016. TCS is scheduled to report its earnings on 18 April and Wipro on 25 April.

Industry body Nasscom also deferred from giving a growth outlook for India’s $150 billion outsourcing sector in February, on account of uncertain macroeconomic outlook.

Operating margin narrowed 40 basis points to 24.7% at the end of the March quarter, compared with 25.1% at the end of December period. For 2016-17, Infosys’s operating margin was at 24.7% compared with 25% in the previous year.

The company added 71 new clients in the fourth quarter, taking the total number of customers to 1,162. Its attrition rate dropped marginally to 13.5% at the end of the March, as against 14.9% in the December quarter. Infosys also named independent director Ravi Venkatesan as co-chairman of the board.

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