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Even as it reported tepid growth for January-March 2015 (Q4) and FY15, India's second-largest IT services company, Infosys, managed to cheer investors by projecting a higher-than-expected revenue growth guidance for FY 16 and announcing a bonus share issue.
Here are the highlights of the company's performance in Q4, FY15 and outlook for FY16:
1) TEPID EARNINGS: For Q4, Infosys posted a net profit of Rs 3,097 crore, up 3.5% annually, but 4.7% lower on a quarterly basis. Revenue for Q4 rose 4.2% year-on-year to Rs 13,411 crore, However, it fell 2.8% on a sequential basis. For FY15, the company's net profit grew 15.8% to Rs 12,329 crore, while revenue rose 6.4% to Rs 53,319 crore. In dollar terms, Infosys posted a 15% growth in net profit for FY15 at $2 billion while revenue rose 5.6% to $8.7 billion, missing the company's guidance of 7-9%. “Naturally I am disappointed that we could not do better, as we had predicted in our guidance,” Infosys CEO Vishal Sikka said during the company's post-earnings analyst call.
2) GOOD GUIDANCE: Infosys cheered investors as it pegged its dollar-revenue growth for FY16 at 10-12%, which is marginally higher than Street expectations, but still lower than industry body Nasscom's guidance for the sector at 12-14%. Most brokerages expected Infosys to guide for a 7-11% revenue growth in FY15.
3) INORGANIC PUSH: For a company that has been rather conservative when it comes to acquisitions, Infosys' new CEO Vishal Sikka has put Infosys on a fast-track to inorganic growth, as the company today announced two new acquisitions. This comes close on the heels of the company's recent acquisition of automation technology firm Panaya. Infosys has entered into a definitive agreement to acquire Kallidus Inc, a provider of digital experience solutions including mobile commerce and in-store shopping experiences to large retail clients. Infosys will pay $120 million in cash for the acquisition. Also, Infosys said it has entered into a definitive agreement for an “early-stage investment” of $2 million in Airviz, to acquire a minority share. Airviz is a personal air quality monitoring startup and spin-off from Carnegie Mellon University. This investment will be made from the $500-million Innovation Fund that the company had set up for investing in new technologies. “Mergers & acquisitions will be a significant part of our strategy going forward and therefore we want to keep a significant amount of funds dedicated towards it,” Infosys' Chief Financial Officer Rajiv Bansal said during the post-earnings conference call.
4) ATTRITION COOLS: After touching record highs for the past several quarters, employee attrition at Infosys cooled off in Q4. During the quarter, attrition at the company was at 18.9%, down from 20.4% a quarter ago, and marginally higher than 18.7% in the same quarter last year. “Our aspiration is to reach lowest level of attrition in the industry, have high diversity and also attract the top talent to Infosys,” Sikka said in a post-earnings conference call. However, net employee addition at the company was only 15,782 in FY15, even as the company said it added 50,000 people on a gross basis.
5) STARTUP FOCUS: Infosys said it has launched 'Infosys Incubator', which will help identify, nurture and grow companies engaged in innovative, new, and disruptive technologies that can help the company's business, and create future growth areas. “By guiding and mentoring these businesses early, we hope to have the first pick of new innovations that we can bring to market and scale, thus improving the chances of viability and long-term success for the startups involved,” Infosys said.
6) SURPRISE BONUS: Infosys today announced a 1:1 bonus share issue, which is a second in around six months. The company's board approved and recommended a bonus issue of one equity share for every equity share held and a stock dividend of one American Depositary Share (ADS) for every ADS held.
7) EDGEVERVE BUSINESS: The newly spun off software products arm of Infosys, Edgeverve, saw growth in terms of revenue and client base. The unit had 12 wins and three clients go-live during Q4.
