Infosys reported a consolidated net profit for the first quarter of the present fiscal year soared 3.2% as compared to the year-ago quarter. The company’s revenue rose 23.6% for India’s second-largest software exporter.
Regardless of the macroeconomic headwinds, the Bengaluru-headquartered company estimate that profits would increase at 14-16% in continuous currency terms this fiscal year from its earlier revenue guidance of 13-15%. The top executives of the company termed the increase in growth as a strong overall demand pipeline and opportunities witnessed in the year so far. Most brokerage houses had estimated Infosys to retain its earlier revenue growth guidance.
In the quarter April-June 2022, the company recorded net profit of Rs 5,360 crore (USD 671.89 million), down 5.7% compared with Rs 5,686 crore (USD 712.76 million) in the March-ended quarter. Consolidated revenue rose 6.8% sequentially to Rs 34,470 crore (USD 4320.93 million), the company stated.
The Chief executive officer (CEO) Salil Parekh indicated that the company is clearly gaining market share. The One Infosys approach is one that brings together many teams to deliver the most appropriate solution to customers. At this stage the company is looking out for what can happen as the environment evolves and changes, he said. He further added that the company is cognizant of the macro ecosystem and is keeping agile to become accustomed to the demand environment. Demand is headed by a combination of projects which are growth-oriented and aimed at reducing costs due to the changing environment, Parekh stated.
The head of research at Reliance Securities (Reliance money) Limited, Mitul Shah in a research note stated that their operating margins were below their expectations. The management though increased its FY23 revenue growth guidance and retained its EBIT margin guidance, indicative of improved performance during the remaining nine months of the year.
Spiking attrition
Infosys, which clocked record attrition of 28.4% in the quarter, up from 27.7% at the end of March – the highest amongst all industry peers, has sustained its target for operating margin growth at between 21-23% with a caution that soon, margins would remain at the lower end of the band due to wage pressure.
In the quarter ending June, margins fell 150 basis points consecutively to 20.1%, ruffled by salary hikes. Nevertheless, attrition developed on a standalone basis for the past two quarters, the company stated.
Attrition has been a major setback for all leading IT firms this quarter as experienced employees cashed in on opportunities in a scorching job market.
Leading peers in revenue growth
Infosys has headed the set of Indian IT exporters this quarter in terms of revenue growth in constant currency, which remained at 21.4% year-on-year.
The system of measurement for India’s largest IT firm Tata Consultancy services (TCS) clocked at 15.5%, HCL Technologies stood a 15.6% growth while Wipro’s number remained at 17.2%.
This appears as TCS, earlier this month, recorded a net profit of Rs 9,478 crore, up 5.2% year on year. The company’s revenue recorded too soared 16.2% to Rs 52,758 crore (USD 6613.39 million).
Infosys anticipates its margins to float around the lower end of the guided range due to cost pressures soon.
TCS margins was recorded at 23.1% while it remained 17% for HCL Tech, lower than their guidance range of 26-28% and 18-20%, respectively
Infosys’ strong demand outlook
The order book of large agreements stood at USD 1.69 billion, downward 26% consecutively assessed with USD 2.3 billion in the previous quarter and USD 2.6 billion in the same quarter last year. The agreement total contract value (TCV) consists of nineteen large agreements inclusive 50% being net new agreements. Digital reported for 61% of overall revenues, rising at 37.5% in constant currency.
Parekh stated that the company is seeing a good traction from their large clients. Large agreements are being volatile during various quarters. What the company sees today is the pipeline for large agreements which is larger than what we had in the earlier three and six months.
The North American market, including the US, increased 18.4% year-on-year and Europe increased at 33.2%, whereas the rest of the world segment increased at 17.8% year-on-year. The Indian market indicated single-digit growth at 5.8% year-on year. All verticals indicated double-digit growth annually, headed by communications and manufacturing recording 30% and 55.2% respectively.