Infosys Q4 profit rises 3.8% to Rs3,597 crore

Bengaluru: Infosys Ltd reported a better-than-expected 1.6% rise in fourth quarter dollar revenue and expects dollar revenue to grow between 11.8% and 13.8% in the current financial year, even as India’s second-largest software services firm ends the financial year with industry-leading growth of 9.1%.

Infosys said on Friday that revenue for the three-month period ended 31 March totaled $2.44 billion, compared with $2.40 billion in the December quarter. In constant currency terms, revenue grew 1.9% sequentially. Net profit grew 1.7% to $533 million from $524 million in the October-December period. In rupee terms, revenue grew sequentially by 4% toRs.16,550 crore, while net profit increased 3.8% to Rs.3,597 crores.

A Bloomberg survey of 34 analysts forecast Infosys to report revenue of $2.48 billion or Rs.16,465.4 crore in the quarter. The analysts estimated the company to report a net profit of $529.81 million or Rs.3,514 crore in the January-March period.

Infosys’s revenue for the year ended March 2016 saw a 9.1% increase to $9.5 billion, a marked improvement from the 5.6% growth recorded in 2014-15. Infosys’s revenue in rupees grew 17.1%, higher than the 6.4% increase a year earlier.

In the quarter to March, Infosys’s business improved across geographies but a 0.3% decline in the banking and financial services space is a sore point. This underscores Nasdaq-listed Cognizant Technology Solutions Corp.’s warning earlier this year of big banks holding back their tech spending. Nonetheless, Infosys’s revenue from Americas improved by 0.5%, while business from Europe increased 2.4% during the quarter.

The company added 89 new clients in the fourth quarter, taking the total number of customers to 1,092.

Its attrition rate improved to 12.6% at the end of the fourth quarter from 13.4% at the end of December, helped primarily by measures implemented by Sikka to boost employee morale.

Infosys also elevated three of its executive vice-presidents to the rank of president. Head of financial services Mohit Joshi, head of delivery S. Ravi Kumar and head of retail Sandeep Dadlani have been elevated to the rank of president, said a statement from the company.

Infosys’s growth of 9.1% for the year ended March 2016 will be much higher than its larger rival, Tata Consultancy Services Ltd, which is expected to grow between 7% and 8%, and Wipro Ltd which will struggle to grow more than 4%. TCS declares its earnings on Monday, while Wipro reports its numbers on Wednesday. However, the management outlining a tad conservative revenue growth for this year means that Infosys, beginning April this year, needs a compounded annual growth of 16.05% to achieve its goal of becoming a $20 billion firm by March 2021.

“I am proud of our company’s achievements in my first fiscal year as CEO of Infosys,” said Vishal Sikka, Infosys chief executive and managing director. “We started the year just two quarters into a strategy to completely reimagine the notion of services and to transform Infosys. Over the course of this year, we saw this strategy, of bringing automation and innovation to our clients, on a foundation of learning and education, start to show results in the organic growth of our client relationships, in our win rates in large deals, and in the types of projects we are seeing in strategic areas where we never participated before. I am proud of what our teams have achieved this quarter and in the year,” he said.

To be sure, under Sikka, Infosys has got back to retain its tag of industry bellwether at least two quarters earlier than the management’s own guidance: Sikka at the start of his term reiterated his predecessor N.R. Narayana Murthy’s promise of getting Infosys back to industry-matching growth numbers by September 2016. At the core of this heartening performance lies Sikka’s strategy of renewing existing service line offerings by introducing newer methods, including user centric approach of Design Thinking and making the over 110,000 engineers in the software development and maintenance side of business to go beyond the scope of work to offer new solutions. At the same time, Infosys is also looking to open new service lines, such as its consultancy and artificial intelligence-led AiKiDo services.

“The big takeaway is the solid guidance,” said a Mumbai-based analyst at a domestic brokerage. “This growth of up to 13.8% in dollar terms is higher than the most optimistic numbers.”

“Now the company has seen a decline in BFSI (banking and financial services) and Americas has just increased by 0.5% in the fourth quarter. But the company has given a good guidance. So this means that the company has won some big deals, which it believes can ramp up in the coming months,” said the analyst.

“Another thing is that the company’s headcount addition in the quarter is very low. About 661 people added in the quarter. So I guess the management will clarify what explains this—you have added fewer people yet you expect good number of projects to drive growth.”