 "Infosys Q4 results: Net profit jumps 30% to Rs 7,969 cr, revenue up 1.3%")
Infosys, India’s second-largest software exporter by revenue, reported a 30 per cent year-on-year (Y-o-Y) increase in its net profit at Rs 7,969 crore for the fourth quarter of 2023-24 (FY24), above the consensus Bloomberg estimates of around Rs 6,166 crore.
Revenue for the quarter grew by 1.3 per cent Y-o-Y to approximately Rs 37,923 crore, falling short of the consensus Bloomberg estimate of around Rs 38,572 crore. Sequentially, revenue declined by 2.3 per cent as clients continued to remain cautious.
In comparison, Tata Consultancy Services (TCS) reported a revenue of Rs 61,237 crore for the quarter, a 3.5 per cent Y-o-Y increase and a 1 per cent rise from the previous quarter. The information technology (IT) services company has projected a revenue growth guidance of 1-3 per cent in constant currency for FY25.
This is due to weak discretionary spending, although spending from the financial services sector shows improvement from the previous financial year.
The company has also guided its operating margin of 20-22 per cent for FY25.
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Infosys announced its results on Thursday after market hours. Ahead of the results, its shares closed 0.41 per cent higher at Rs 1,420.55 on the BSE. However, the company’s American Depository Receipt shares partially recovered after dropping nearly 7 per cent on the NYSE following the results.
Infosys’ dollar revenue remained flat Y-o-Y and declined by 2.2 per cent sequentially in constant currency to $4.6 billion, on the back of large deals with a total contract value (TCV) of $4.5 billion.
“We delivered the highest-ever large deal value in FY24. This reflects the strong trust clients have in us. Our capabilities in generative AI continue to expand. We are working on client programmes, leveraging large language models with impact across software engineering, process optimisation, and customer support,” said Salil Parekh, managing director and chief executive officer, Infosys.
The $250-billion Indian IT services industry is grappling with challenges due to macro headwinds in key geographies like the US and Europe. This has led to delays in client decision-making and a reduction in discretionary spending.
Operating margins for the March quarter narrowed to 20.1 per cent from 21 per cent in the same period last year and 20.5 per cent in the preceding quarter.
“The board has approved a capital allocation policy under which the company expects to return 85 per cent over the next five years and progressively increase the annual dividend per share,” said Jayesh Sanghrajka, chief financial officer of Infosys. “Operating margin expansion in the medium-term and improving cash generation continue to be our priorities, underpinned by early success in Project Maximus.”
Financial services and retail are the largest verticals, together accounting for close to half of Infosys’ revenues. Revenues from financial services declined by 8.5 per cent Y-o-Y in constant currency and contributed 26.4 per cent to the total revenue for the March quarter. Revenues from retail declined 3.7 per cent in constant currency, contributing 14.3 per cent to the total revenues for the March quarter.
The attrition rate moderated to 12.6 per cent from 12.9 per cent in the previous quarter, indicating a downward trend observed across the sector. In the same quarter last year, the attrition rate was at a high of 20.9 per cent.
“Infosys’ weak quarterly numbers, lower-than-expected guidance for FY25, and declining headcount reflect continued weakness. The only silver lining is the strong large deal TCV in Q4 and a record $17.7 billion for FY24. We believe the company is well-positioned to capture cost optimisation and transformation programmes, given its strong domain capabilities and solid execution,” said Sanjeev Hota, head of research at Sharekhan by BNP Paribas.
Infosys also announced its plans to acquire Germany-based in-tech, a leading engineering R&D services provider, to bolster its ER&D capabilities in the automotive ecosystem and expand its footprint across Europe.