Guidance in line with client connect, demand: Infosys CEO Salil Parekh

The momentum on the digital side gives us confidence as well, says Salil Parekh

On the back of a strong large-deal momentum, Infosys raised its revenue guidance for the whole of FY20. This is despite some research firms having forecast an impending slowdown in client spend. Infosys CEO and Managing Director SALIL PAREKH tells Debasis Mohapatra and Yuvraj Malik that the company’s past investment in sales, digital services and localisation have started yielding dividend. Edited excerpts: 

What gave you the optimism to guide for double-digit revenue growth? 

Considering the global economy today, the Q1 and Q2 GDP numbers in the US were good. Our growth, today, comes from a lot of investment that we have put in sales, and from digital. This is supportive of the guidance that we have provided. 

Based on what we see today, our guidance is in line with the client connect we have, and the demand we have seen. There are concerns in some segments. As we have pointed out earlier, segments such as life sciences are not growing (as fast as we wish).

However, we have seen good growth in other segments, which gives us the confidence. We have increased the guidance to 8.5-10 per cent, which is a range. The momentum on the digital side gives us confidence as well.  

How much of the revenue has started flowing in from large deals and joint ventures clinched in the March quarter? 

As far as revenue flow is concerned, we don’t disclose numbers from our Q4 deals. But yes, they have started flowing in. Speaking of JVs, those are at a smaller stage, though they will have a bigger contribution in the medium term.

It seems Infosys’ incremental revenue is coming at a greater cost. Will a 21-23 per cent margin guidance for this financial year be maintained? 

We made those strategic investments in the last fiscal on sales, digital and localisation. For this financial year, we have given a guidance of 21-23 per cent. We are at 20.5 per cent now, which is on account of one of the one-off items. In the coming quarters, we expect margins to improve, which will be in our guided range.  

As far as contribution to overall revenue is concerned, the US is getting stronger while Europe’s share is declining. 

Will the company look at recalibrating this? 

Both the US and Europe are growing strongly. In fact, our US business has grown faster (at around 13 per cent) than Europe (11.4 per cent). Internally, we have some views and have entered into some strategic partnerships in Europe. However, those are more medium-term. 

Have you sought any clarification from the government or Sebi on the proposed taxation on share buybacks?

The industry is making representations to the ministry on whether the government should provide ‘grandfathering’ benefits for companies (who are currently in the process of buyback). Industry representation through Nasscom is being done on this matter.