 "Infosys")
Infosys’ performance in the fourth quarter of FY23 was subdued owing to unplanned project ramp-downs and delays in decision-making by the company’s clients.
Also, the IT major’s revenue growth guidance for FY24, in the range of 4-7 per cent, was lower than Street expectations, and much below the rise the company clocked in FY23. Consolidated net profit rose 7.8 per cent year-on-year (YoY) to Rs 6,128 crore in the quarter ended March 31. This was against Rs 5,686 crore in the year-ago period. The profit declined 6.9 per cent on a sequential basis, the company announced on Thursday.
Revenues from operations grew 16 per cent to Rs 37,441 crore as against Rs 32,276 crore in Q4 FY22. Revenues from the financial services and communication business segments shrank by 1.7 per cent and 2.1 per cent, respectively, compared to last year.
Total revenues sequentially dropped 2.3 per cent, down from Rs 38,318 crore in Q3 FY23.
Infosys missed Bloomberg estimates on both revenue growth and net profit for the quarter. Bloomberg had estimated revenue to be Rs 38,769 crore and net income at Rs 6,612 crore.
For the full year, Infosys reported revenues of about Rs 147 trillion, up 20.7 per cent. Net profit grew 9 per cent at Rs 24,095 crore.
For FY23, the board has recommended a final dividend of Rs 17.50 per share. Together with the interim dividend of Rs 16.50 per share, which has been paid, the dividend per share for FY23 sums up to Rs 34.
The operating margin for the quarter was 21 per cent, dropping 50 basis points both sequentially as well as yearly.
Margin guidance for FY24 is in the range of 20-22 per cent, against the street estimates of 21-23 per cent.
“In Q4 we saw changes in the market environment. During the quarter, we saw unplanned project ramp-downs in some of our clients and delays in decision-making, which resulted in lower volumes. In addition, we had some one-time revenue impact. While we saw some signs of stabilisation in March, the environment remains uncertain,” said Salil Parekh, chief executive officer and managing director.
Constant-currency revenues from North America, the largest market for Infosys, grew merely 6 per cent, while those from Europe were up 20.3 per cent.
Parikh added clients across sectors including retail, telecom, high tech and some financial services had stepped back from their projects.
For both TCS and Infosys, the Q4FY23 performance was below expectations. If TCS missed estimates on growth, Infosys’ low guidance and a negative growth rate sequentially came as a shocker. TCS’s sequential revenue growth in constant-currency terms was 0.6 per cent, one of the lowest in the last 11 quarters.
Sanjeev Hota, head of Research, Sharekhan by BNP Paribas, said: “Infosys delivered a surprisingly weak set of numbers in Q4 and missed street estimates and ours too on all fronts owing to unplanned projects rammed down and cancellations across sectors. The sequential revenue decline of 3.2 per cent on a constant-currency basis is worse than sequential declines seen in the peak of Covid-19 crises.”
Guidance for FY24 seems to be modest and below expectations both on revenues and margins, he added.
“Management commentary does not inspire confidence on the business outlook amid an uncertain demand environment. We expect the stock to underperform in the near term.”
The value of large deals closed in Q4 stood at $2.1 billion whereas for FY23 it stood at $9.8 billion.
Total contract value (TCV) on a sequential basis was low. In Q3 Infosys signed a TCV of $3.3 billion. The company management said the large deal pipeline remained strong despite macroeconomic challenges.
“As the environment has changed, we see strong interest from our clients …, resulting in a strong large deal pipeline. We have expanded our internal programme on efficiency and cost to build a path to higher margins in the medium term. We continue to invest in our people and in supporting our clients,” Parikh said.
The company’s attrition rate during the fourth quarter dropped to 20.9 per cent, as compared to 24.3 per cent in Q3. The employee count as of March 31 stood at 343,234, marking a drop of 3,611 from the previous quarter.
