Infosys ups guidance on Robust Growth in Second Quarter

Bengaluru, Oct 12: Buoyed by a robust revenue growth in the second quarter (July-September), software major Infosys on Monday revised its guidance for this fiscal (2015-16) two percent upwards in rupee terms under the Indian accounting standard.

“We have increased our consolidated revenue guidance for this fiscal year (FY 2016) to 13.1-15.1 percent from 11.5-13.5 percent in rupees but lowered to 6.4-8.4 percent from 7.2-9.2 percent in dollars projected in July,” Infosys said in a statement here, keeping in view the currency volatility in the foreign exchange market.

The IT bellwether posted Rs.53,319 crore or $8.7 billion revenue last fiscal (2014-15), which was a 6.4 percent growth in rupees and 5.6 percent in dollars year-on-year (YoY). The company has, however, discontinued giving quarterly guidance over a year. The company has also increased the conversion rate for rest of the fiscal 2016 by $1.95 to Rs.65.59 from Rs.63.65 per dollar in July, as rupee weakened during the quarter.

Earlier in the day, the company reported a net profit of Rs.3,398 crore for the quarter (Q2) under review, registering a 9.8 percent growth YoY and 12 percent sequentially. Consolidated revenue for the quarter grew 17.2 percent YoY and 8.9 percent sequentially to Rs.15,635 crore under the Indian accounting standard. Under the International Financial Reporting Standard (IFRS), net income increased 1.6 percent YoY and 9 percent sequentially to $519 million and gross revenue 8.9 percent YoY and 6 percent sequentially to $2,392 million ($2.4 billion).

“We had a strong all-round growth during the quarter driven by recent initiatives around service differentiation, improvement in client mining and higher focus on winning large deals,” Infosys Chief Operating Officer (COO) U.B. Pravin Rao said in the statement. The sequential revenue growth of six percent was also highest in the last 16 quarters in dollar terms and at 6.9 percent in constant currency.

“Increase in revenue productivity was significant, volume growth was robust, client metrics and utilisation improved while attrition remained stable,” Rao asserted. The company, including subsidiaries worldwide, has added 82 clients during the quarter, taking the total to 1,011 as against 987 a quarter ago and 912 a year ago. Five large deals with total contracts value of $983 million were signed in the quarter.

“Our focus on operational efficiencies has resulted in increase in operating margins despite higher variable payouts,” outgoing Chief Financial Officer (CFO) Rajiv Bansal said on the occasion. Bansal also claimed that the company mitigated the impact of currency volatility by pro-actively hedging for the quarter. Ahead of the festival season, the blue-chip company announced 200 percent interim dividend or Rs.10 for each share of Rs.5 at par for first six months (April-September) of this fiscal.

“The board of directors declared an interim dividend of Rs.10 per share. The record date for payment of dividend is October 19,” the statement added. The half-yearly dividend is, however, 400 percent less than 600 percent or Rs.30 per share the company gave for same period last fiscal (2014-15). Liquid assets, including cash, increased to $4,894 million by quarter-end from $4,750 million a quarter ago (April-June).

“We are experiencing a once-in-generation opportunity for a services company to help businesses maximise their potential with technology,” chief executive Vishal Sikka asserted in the statement. Noting that the company was taking steps to become a complete services organisation, Sikka said results in any one quarter were transitory snapshots of a long journey. “We remain focused on execution to produce encouraging results for clients, shareholders and employees,” Sikka added.

Though the company and its subsidiaries worldwide added 17,595 employees in the quarter, exit of 9,142 techies led to a net addition of 8,453 and total headcount to rise 187,976 from 179,523 a quarter ago and 165,411 a year ago. “On annualised basis, attrition declined to 19.9 percent from 24.8 percent in like period year ago, while marginally (0.7 percent) up from quarter ago,” the company admitted in the statement.

In a related development, the company announced the resignation of its CFO (Bansal) and the appointment of its strategic operations’ head M.D. Ranganath as the new CFO with effect from Tuesday. “Bansal has informed the company of his intention to resign. He will be replaced by M.D. Ranganath at the close of business on Monday,” the company said in a statement, after announcing the financial results for Q2. Bansal, who has been also executive vice-president, will however continue as an advisor to Sikka and the board till December 31 for a smooth transition.