Infosys net profit rises 17.5% in Q4, announces Rs 9,200-crore buyback

FY22 revenue growth forecast at 12-14%

Information technology (IT) services major Infosys on Wednesday posted a 17.5 per cent jump in net profit for the March quarter on a year-on-year (YoY) basis, even though it was down 2.3 per cent sequentially.

Infosys’s board also approved a share buyback of up to Rs 9,200 crore. The buyback will be done from the open market and the price per share will not exceed Rs 1,750 crore. This is part of the firm's capital return plan of Rs 15,600 crore, which also includes a final dividend of Rs 6,400 crore.  

The country’s second-largest IT services firm forecast annual revenue growth of 12 to 14 per cent in constant currency terms and operating margins in the range of 22-24 per cent for 2021-22, as demand for its digital services grows amid the Covid-19 pandemic.

Salil Parekh, chief executive officer and managing director of Infosys, described FY21 as an exceptional year. “Our digital business is now 51.5 per cent of the total revenue for Q4, growth of 34 per cent YoY in constant currency terms. Our large deals of $14.1 billion for the year are the strongest ever. We are exiting FY21 on a strong momentum, alongside a focused strategy to accelerate client digital journeys. This gives us confidence about a stronger FY22,” he said.

The company’s revenue of Rs 26,311 crore in Q4FY21 was up 2 per cent quarter-on-quarter, and rose 9.6 per cent YoY. Operating margins, at 24.5 per cent, for the quarter expanded by 320 basis points for the full year; margins were down sequentially.

The management said that though they were confident about the demand environment going ahead, with customers looking robust on tech spends, especially cloud and digital, margins would get impacted by wage hikes, which would be staggered. The company expects travel to pick up in the second half of the current fiscal year.

Infosys’ capital return policy came into being a couple of years back. As part of it, 85 per cent of cash is returned to shareholders -- either through dividends or buyback. “If you look at the payout we have done in the last two years (FY 20 and FY21), we would have returned about 83 per cent of the 85 per cent to shareholders,” explained Nilanjan Roy, chief financial officer.

When compared to industry peer Tata Consultancy Services (TCS), Infosys performed better on a year-on-year basis, but lagged in sequential growth. For instance, the total contract value that TCS registered for Q4 was $9.2 billion; Infosys, on the other hand, has large deal signing of $2.1 billion, lower than the $7.1 billion it signed in Q3.

“Infosys has reported a mixed set of numbers for Q4FY21. It has given a healthy double-digit guidance and has also been able to defend its margins despite wage hikes. In addition, the company has consistently performed in revenue terms over the past few quarters and is also narrowing the gap between TCS & its margins,” said a report by ICICI Direct Research.

Debashish Mazumdar of Edelweiss Wealth Research in his report said: “Infosys stock outperformed TCS in recent times. But, the company in this quarter underperformed TCS on all parameters, like growth, deal signs margin and attrition.”

Infosys’ margins were at 24.5 per cent, a fall of 90 basis points due to wage hikes and cross currency. The company expects a wage hike impact on margins even in the first quarter of FY22. TCS’ operating margins were 26.8 per cent, an improvement of 20 basis points.

On a full-year basis, Infosys crossed the milestone of Rs 1 trillion in revenue. For FY21, the company reported revenue of Rs 1,00,472 crore, growth of 5 per cent YoY.

Growth for the quarter and the year was driven by the BFSI and lifescience sector. BFSI grew 15.6 per cent on a constant currency basis in the fourth quarter. Of the 25 large deals signed, six were from the BFSI segment.

One of the concern areas for Infosys is the attrition rate. For the quarter the company's voluntary attrition rate touched a high of 15.2 per cent, up from 10 per cent it reported in the quarter ended December 31, 2020.