Infosys beats analyst estimates for Q4-FY19

Bengaluru: Infosys Ltd overshot revenue and profit expectation for the financial year ended FY19 by a small margin, even as it offered to pay dividends at ₹17.50 per share to shareholders.

A Bloomberg survey of 26 brokers had estimated Infosys’ to report revenue of $3.08 billion, or ₹21,449.8 crore, in the current quarter. The brokers also estimated the company to report a net profit of $570.07 million, or ₹3697.2 crore, in the same period.

However, Infosys’s fourth quarter results' announcement and guidance for fiscal year 2019-20 (FY20) may not please shareholders and analysts. The company’s statement says that revenue guidance for the financial FY20 would be between 7.5% and 9.5%.

The company added that its operating margin guidance for the FY20 would be between 21 to 23%.

Infosys also declared a special dividend of shares at ₹10.50 per equity share and with an inclusion of ₹7 per share via interim dividends, taking the total dividend for the year FY19 to ₹17.50 per share.

Currency fluctuations, however, helped the company’s dollar revenue. In the January-March period (Q4FY19), Infosys reported a 2.4% sequential rise in dollar revenue to $3.06 billion, allowing it to end fiscal year 2018-19 (FY19) with $11.79 billion in revenue, a 7.9% year-on-year growth.

In constant currency terms, Infosys managed a 11.7% Y-o-Y growth in terms of revenue for the fourth quarter of 2019. Additionally, Infosys also reported a 2.1% sequential growth in revenue in terms of constant currency.

In rupee terms, Infosys’ revenue for the fourth quarter of FY19 stood at ₹21,539 crore, compared to ₹18,083 crore a year ago during the same period. For the year ended 2019 (FY19), Infosys reported revenues of ₹82,675 crore, up 17.2% from ₹70,552 crore in FY18.

Infosys’s net profit increased 10.5% to ₹ ₹4,078 crore for the fourth quarter ended 31 March, against ₹3,690 crore in the same period a year ago. Operating margin stood at 21.5% in the fourth quarter of 2019, 110 basis points narrower than the 22.6% in the October-December period.

For the full year ended 2019, the company’s net profit decreased by 3.9% to ₹15,410 crore. With a slight fall in profitability, the lower margin guidance for FY20 and the slightly low revenue forecast may be a dampener for investors.

The BFSI sector continued to fetch the majority of Infosys’ revenue in the year ended March 2019, accounting for 31.6% of its overall operating income in Q4FY19. However, the BFSI business saw a marginal drop in growth in the fourth quarter and so did the retail and life sciences segments.

While attrition rates have increased to 20.4% in Q4FY19, from 19.4 in the same period last year.

Revenue contributions from the digital segment (services, products and platforms), however, increased by 2.3% to around 33.8% in Q4-FY19, while retail industry accounted for around 15.9% of Infosys’ overall revenue in Q4-FY19.

“We have completed the first year of our transformation journey with strong results on multiple dimensions including revenue growth, performance of our digital portfolio, large deal wins, and client metrics.

This is a reflection of our increased client relevance stemming from our focus on digital, positioning, and longstanding client relationships", said Salil Parekh, CEO and MD. “Our planned investments have started yielding benefits. As we look ahead into fiscal 2020, we plan to deploy various measures of operational efficiencies across the business."

Commenting on the high attrition rates, Pravin Rao, Chief Operating Officer Infosyssaid, "Primary challenges in meeting attrition targets are because of higher attrition across the 3-5 experience bracket, and 2-3 yrs exp in US marker. We are including milestone-based appreciation (for employees) for the upcoming year, and also encouraging our employees to take up skill upgrade courses." Infosys aims to reduce the attrition rates to a "slightly more comfortable" 13-15%.

The results were declared after market hours. Infosys gained 0.63% to close at Rs747.85 per share on Friday on BSE, while the benchmark index, Sensex gained 0.41% to close at 38767.11 points and the BSE IT Index gained 0.19% to close at 15471.41 points.

Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.