Infosys expects revenues to grow as much as 15% in FY23
Infosys announced on Wednesday that its consolidated net profit (after minority interest) for the fourth quarter ended March (Q4) increased by 12% year on year to Rs 5,686 crore, up from Rs 5,076 crore a year ago.
In Q4FY22, revenue increased by over 23% to Rs 32,276 crore, compared to Rs 26,311 crore in Q4FY21.
The company’s stock closed 0.4 per cent higher on the BSE on Wednesday at Rs 1,748.65. According to the corporation, the business’s board of directors recommended a final dividend of Rs 16 per equity share for the fiscal year ending March 31, 2022.
“Together with the Rs 15 interim dividend previously paid, the total payout per share for FY22 will be Rs 31, representing a 14.8 per cent increase over FY21. As a result, the company has declared a total dividend of almost Rs 13,000 crore for FY22, “According to the Bengaluru-based IT giant.
“With a broad-based performance driven by fundamentally differentiated digital and Infosys Cobalt led cloud capabilities, propelled by the ‘One Infosys’ approach, Infosys delivered its greatest yearly growth in a decade.” As a consequence of our client’s continued trust in our ability to successfully navigate their digital journeys, we continue to grow market share,” stated Salil Parekh, CEO and MD of Infosys.
On a year-over-year basis, net profit fell 2.1 per cent while revenue increased 1.3 per cent. Revenue growth is expected to be 13 per cent to 15 per cent in 2022-23, with an operating margin of 21 per cent to 23 per cent in FY23, according to the IT services behemoth.
“The company’s expansion was broad-based, aided by strong momentum insignificant deal wins, with a total value of $9.5 billion in FY23. In rupee terms, EPS increased by 15.2 per cent. In constant currency, Q4 sequential growth was 1.2 per cent, with an operating margin of 21.5 per cent. In Q4, the total value of significant deal wins was $2.3 billion, “In a stock exchange filing, Infosys stated.
The company announced a gross addition of 110 customers in the March quarter, compared to 130 in the last quarter. In Q4FY22, voluntary attrition was 27.7%, compared to 10.9 per cent in Q4FY21.
In the wake of the Ukraine conflict, the Indian software juggernaut Infosys Ltd announced on Wednesday that it is relocating its company out of Russia and investigating alternative possibilities.
Oracle Corp and SAP SE, two other large IT and software companies, have ceased or paused all operations in Russia.
Infosys’ net profit increased 14.3% to Rs 22,110 crore in the last fiscal year, while revenue increased 21% to Rs 1.21 trillion. “With a robust demand environment ahead, we envision making appropriate long-term investments in capability building across sales, delivery, and innovation,” said the company. We hope to mitigate some of the damage with cost-cutting solid initiatives and value-based pricing based on service and brand distinction. The margin guidance reflects this and the post-pandemic normalisation of spending,” stated Nilanjan Roy, Chief Financial Officer.
In a press conference, Salil Parekh, CEO and MD of Infosys, said, “Our continuous momentum in FY22, substantial deal wins, healthy deal pipeline, and client confidence in our capabilities gives us comfort to provide a guidance of 13 to 15 per cent for growth in fiscal 2023 in constant currency terms.”
Compared to the last fiscal year, Infosys’ net profit increased 14.3% to Rs 22,110 crore, while sales increased 21% to Rs 1,21,641 crore.
The company’s growth throughout the fiscal year, according to Parekh, was broad-based, spanning business areas, service lines, and geographies.
“Today’s demand situation appears to be healthy. Yes, there is a lot of discussion about the macro environment. However, we see a definite need from our customer base in our pipeline and our digital and cloud work,” says Parekh.
He noted that Infosys continues to acquire market share due to customers’ continued trust in the company’s ability to navigate their digital journeys successfully.
“…Based on what we’ve seen in terms of major deals…and what we’re seeing in our pipeline going forward, we’re confident that this is the guidance for the year, with a 13 to 15% growth rate. We’ll see what the many forces are that will play into all of this as the year develops, “The CEO of Infosys stated.
In dollar terms, the Q4 net profit was $752 million, up nearly 8% year over year, while sales were $4,280 million, up 18.5 per cent from the last quarter.
Net profit for the full fiscal year was $2.9 billion, up 13.4% over the last year. Revenue increased by 20.3% to $16.3 billion.
Infosys Limited is an Indian multinational IT conglomerate that specialises in business consulting, information technology, and outsourcing. The company was founded in Pune and is based in Bangalore. According to the Forbes Global 2000 list, Infosys will be the second-largest Indian IT company by 2020, behind Tata Consultancy Services and the 602nd largest public company in the world. The company’s credit rating is CRISIL AAA / Stable / CRISIL A1+.
Infosys became the fourth Indian business to reach a market valuation of $100 billion on August 24, 2021.
Infosys was founded in 1981 by seven engineers in Pune, Maharashtra, India, with a $250 investment. Infosys Consultants Private Limited was established on July 2, 1981. In 1983, it relocated its headquarters to Bangalore, Karnataka, India.
In April 1992, the firm changed its name to Infosys Technologies Private Limited and then to Infosys Technologies Limited when it went public in June 1992. In June 2011, it was rebranded to Infosys Limited.
In February 1993, an IPO was launched with a share price of 95 and a book value of 20. The IPO was undersubscribed, but Morgan Stanley, a US investment bank, “bailed it out” by purchasing a 13 per cent stock share at the offer price. Its shares were first traded in June 1993 at a price of 145 (equal to 890 or US$12 in 2020).
In 1999, American depositary receipts for Infosys shares were listed on the Nasdaq stock exchange. It was the first Indian company listed on the Nasdaq stock exchange. By 1999, the stock had risen to $8,100 (equal to 30,000 or US$390 in 2020), making it the most expensive stock on the market. Infosys was one of Nasdaq’s top 20 businesses by market capitalisation at the time. To give European investors better access to the company’s shares, the ADR listing was moved from Nasdaq to NYSE Euronext.
On July 28, 2010, then-British Prime Minister David Cameron paid a visit to Infosys’ Bangalore headquarters and addressed the company’s employees.
In 1999, it made $100 million in revenue, $1 billion in 2004, and $10 billion in 2017.
In 2012, Infosys announced the opening of its 18th foreign office in the United States, in Milwaukee, Wisconsin, to serve Harley-Davidson. In 2011, Infosys hired 1,200 people in the United States, and in 2012, the company hired another 2,000 people. Infosys announced its expansion in Indianapolis, Indiana, in April 2018. The project will cover more than 120 acres and create 3,000 new employment, up from the earlier estimate of 2,000.
Infosys launched EdgeVerve Systems, a product subsidiary focused on enterprise software products for business operations, customer support, procurement, and commerce network sectors, in July 2014. Finacle Global Banking Solutions assets were officially transferred from Infosys in August 2015 and formed part of the product range of EdgeVerve Systems.
Products and services
Companies in the financial, insurance, manufacturing and other industries use Infosys’ software development, maintenance, and independent validation services.
Finacle, a universal banking system with many modules for retail and corporate banking, is one of its well-known offerings.
Its products and services are:
• NIA – Next Generation Integrated AI Platform
• Infosys Consulting
• Cloud-based enterprise transformation services
• Infosys Information Platform
• EdgeVerve Systems
• Panaya Cloud Suite
• Engineering Services
• Digital Marketing
As of March 31, 2018, Infosys had 82 sales and marketing offices and 123 development centres throughout the world, with a strong presence in India, the United States, China, Australia, Japan, the Middle East, and Europe.
Projects in North America, Europe, and India accounted for 60 per cent, 24 per cent, and 3 per cent of its sales in 2019, respectively. The revenue balance came from the rest of the world, which accounted for 13% of total revenue.
Infosys’ position in Russia to serve the energy industry there was questioned in 2022. Despite Russia’s invasion of Ukraine, the company, unlike Western corporations like Oracle, has refused to leave the country.
Listing and shareholding pattern
The stock of Infosys is traded on the BSE, where it is a component of the BSE SENSEX, as well as the NSE, where it is a component of the NIFTY 50. Its shares are traded as American depositary receipts on the New York Stock Exchange.
The promoters’ shareholding rapidly declined after the company’s shares were first listed in June 1993. The promoters’ holdings were reduced when Infosys became the first Indian-registered corporation to list Employee Stock Option Schemes and ADRs on NASDAQ on March 11, 1999. As of July 29, 2021, the promoter owned 12.95 per cent, foreign institutional investors (FIIs) had 33.39 per cent, and domestic institutional investors (DIIs) had 21.98 per cent.
Infosys will continue to gain as clients raise spending: CEO Salil Parekh
Sustained investments over the last four years have helped the company gain market share as customers increase their expenditure on digital applied sciences to transform their businesses, according to CEO Salil Parekh.
This business growth is expected to continue as international demand for IT services remains strong, according to the 57-year-old IT industry veteran.
Infosys expects revenue to grow by 19.5-20 per cent in the current fiscal year, up to three percentage points from its last prediction.
Analysts predict that the Bengaluru-based software exporter would beat larger rival Tata Consultancy Services (TCS).
“Overall, market traction is robust, the demand climate is favourable, and we continue to gain market share,” said Parekh, who has been at the helm for four years. “In the last 18-24 months, large firms have noticed the benefits of digital to better engage with customers, employees, and supply chain partners. He went on to say, “They’ve gone faster into it.”
Large firms are well on their way to digital transformation, while others are speeding up the process, and more are jumping on board, according to him.
Indian IT firms have benefited the most from Covid-19-induced tech spending by multinational firms like Daimler, Metro AG, Vanguard, and Swiss Re, as they appear to shift their applications—which were early built for private computer systems and housed in servers on their premises—to the Cloud and allow access via individual smartphones.
‘Fast Growth in Big Tech Client Base’
The increase in business has boosted Infosys’ stock and its peers TCS, Wipro, and HCL Technologies.
The BSE’s IT index has increased 210 per cent from March 23, 2020, to Wednesday’s close, compared to a 125 per cent rise in the benchmark Sensex during the same time period. The stock of Infosys has risen 254 per cent, outperforming the IT index.
Digital activities, which include moving applications to the cloud, delivering analytics-based insights, providing cybersecurity, and designing fresh apps, now account for 58 per cent of Infosys’ revenue, up from 25 per cent in the fiscal year 2018, according to Parekh.
“We will continue to see more traction in the market if we continue to build a portfolio linked to digital transformation, which includes cloud, IoT (Internet of Things), data and analytics, and others,” he said.
Due to the “tremendous pace” at which they’re growing, large IT organisations have become a “rapid growth area” within their customer base.
“In that sector, we have extensive relationships with diverse companies.” And their expansion is so quick in many locations that they’re delighted to work with Infosys as we go along, supporting them in all elements of technology and operations,” he said. “For digital natives, there are a plethora of options.”
For example, Apple, Google, Microsoft, and Facebook have a large income base and a disproportionate market dominance in their respective sectors.
The overall increase in technology spending has also resulted in high demand for qualified personnel at Infosys and among competitors.
Infosys, which has developed a model of employing hundreds of freshers from school campuses, coaching and deploying them on projects, saw attrition rates reach 25.5 per cent in the quarter ending in December.
Although, according to Parekh, the firm’s ability to serve clients “has not been hampered at all.”
In addition to three wage increases last year to reduce attrition, Infosys plans to hire 55,000 freshers this year, the most in a single year, to expand the talent pool available for initiatives.
According to Parekh, the company can reward employees with promotions and other incentives.
Even though the company has once more switched to making money working from home thanks to the new Covid-19 wave from the Omicron variation, Parekh remarked that “social capital is crucial.”
Staff will return to their locations of work overtime, regardless of whether the company retains the flexibility of the hybrid work mannequin.
“We’ve seen that in several cities where we have our centres so far… There’s some plateauing going on, but we’ll see how long it lasts. Fortunately, unlike the prior wave, we are not witnessing a high degree of hospitalisation among the employee base. So…once this is over, we’ll re-engage flexibly (and) folks will begin to return to the workplace,” he said.
In response to Infosys’ attempts to assist the federal government’s earnings tax site, Parekh revealed that over 58 million I-T reports had been filed as of December 31, 2021, the deadline for individual tax submissions.
He further indicated that many of these returns had already been processed.
“We’re currently working on enhancements and additional modules that we’ve been discussing with the (I-T) department, and that will start to roll out over the coming few months,” he said.
Infosys Q4 profit misses estimates, but full-year revenue guidance beats expectations | 10 key takeaways
The country’s second-largest IT services firm, Infosys, reported lower-than-expected earnings growth in the March 2022 quarter. Still, its revenue growth projection was above analysts’ expectations for the current fiscal year.
The following are ten major takeaways from the earnings report:
Due to lower-than-expected sales growth and a drop in operating margin, the company’s consolidated profit fell 2.1 per cent sequentially to Rs 5,686 crore for the quarter ended March 2022. Profit was estimated at Rs 5,980 crore in a CNBC-TV18 survey.
In monetary terms, profit declined 2.9 per cent from the last quarter to $752 million in Q4FY22.
Compared to the previous year, profit increased 14.3% to Rs 22,110 crore in FY22, owing to huge sales and operating growth, albeit margin fell.
On a sequential basis, consolidated sales increased by 1.3 per cent to Rs 32,276 crore in the March 2022 quarter, while revenue in dollar terms increased by 0.7 per cent QoQ to $4,280 million, falling short of forecasts. Analysts surveyed by CNBC-TV18 estimated sales at Rs 32,867 crore and $4,365 million, respectively.
In constant currency terms, quarterly revenue growth was 1.2 per cent, which was lower than CNBC-TV18 poll projections of 3.2 per cent for Q4.
In Q4FY22, digital revenues increased by 1.8 per cent QoQ to $2,532 million, accounting for 59.2 per cent of overall revenue.
In FY22, Infosys saw a 21.1 per cent increase in sales, to Rs 1.21 lakh crore, compared to the last year, and a 20.3 per cent increase in USD revenue, to $16.31 billion.
In constant currency, topline growth for FY22 was 19.7%, which was within the company’s projection range of 19.5-20%.
“…produced $16.3 billion in revenue, with a healthy operating margin of 23% and the greatest annual growth rate in the prior decade of 19.7% in constant currency. The company’s expansion was broad-based, aided by ongoing momentum in significant transaction wins, “The IT firm stated in a BSE filing.
According to Salil Parekh, CEO and MD, the broad-based performance was driven by profoundly differentiated digital and Infosys Cobalt-led cloud capabilities, backed by the ‘One Infosys’ approach. “As a result of our client’s continued trust in our ability to successfully navigate their digital journeys, we continue to increase market share.”
In constant currency, Infosys predicts revenue growth of 13-15 per cent for the current fiscal year 2022-23, which is higher than CNBC-TV18 poll estimates of 12-14 per cent.
The operating profit margin for FY23 is expected to be in the region of 21-23 per cent, compared to 22-24 per cent expected by experts.
4. Deal Wins
Deal wins totalling $9.5 billion for the financial year 2021-22, and $2.3 billion for Q4FY22 were reported by the next-generation digital services and consultancy organisation.
The company added one client apiece in the $100 million+ and $10 million+ categories. It had 1,741 active customers at the end of March 2022, up from 1,738 at the end of December 2021.
5. Operating Performance
Operating profit fell 7% sequentially to Rs 6,956 crore in Q4FY22, with margin contracting to 21.5 per cent, down 200 basis points from the last quarter.
Operating profit increased by 13.8 per cent to Rs 28,015 crore in the entire year, while margin dipped by 150 basis points to 23 per cent, remaining within the forecast range of 22-24 per cent.
In Q4FY22, operating expenses climbed by 2.7 per cent sequentially to Rs 3,048 crore. In comparison, tax expenses declined by 12.9 per cent QoQ to Rs 1,848 crore.
Compared to the last year, full-year operational expenses increased by 11.4 per cent to Rs 11,628 crore, while tax charges increased by 10.5 per cent to Rs 7,964 crore.
7. Other income
Other income climbed by 27.9% to Rs 587 crore in the December 2021 quarter, while other income increased by 4% to Rs 2,095 crore in the full year compared to the last year.
8. Employee Metrics
At the end of March 2022, the corporation had a total workforce of 3.14 lakh, up 7.5 per cent from 2.92 lakh employees in December 2021.
By the end of March 2022, the voluntary attrition rate had risen to 27.7%, up from 25.5 per cent in December 2021.
The utilisation rate including trainees fell to 80 per cent in the quarter ending March 2022, down from 82.7 per cent the previous quarter, and the same rate excluding trainees fell to 87 per cent, down from 88.5 per cent the last quarter.
9. CFO Comments
“In a year characterised by acute supply-side pressures, Infosys generated outstanding financial performance – EPS growth of 15.2%, free cash flows exceeding $3 billion, and return on equity of 29.1%, driven by client-centricity and deep capabilities,” said Nilanjan Roy, Infosys’ Chief Financial Officer.
He added that Infosys plans to spend appropriately on long-term capabilities growth in sales, delivery, and innovation with a strong demand environment ahead. Nonetheless, “We want to mitigate some of the damage through aggressive cost-cutting initiatives and value-based pricing based on service and brand uniqueness. The margin guidance reflects this and the post-pandemic normalisation of spending.”
10. Capital allocation
The board of Infosys has recommended a final dividend of Rs 16 per share for FY22. “When combined with the interim dividend of Rs 15 per share that has already been paid, the total dividend per share for FY22 would be Rs 31, representing a 14.8 per cent increase over FY21.”
The corporation has now declared a total dividend of almost Rs 13,000 crore for the entire year.
edited and proofread by nikita sharma