Infosys: Key metrics steady in a seasonally weak quarter

IT services major’s FY19 guidance matches Nasscom projections

Starting with a clean slate and getting Infosys back to its old ways of being ‘boringly predictable’ seem to be focus points of the company’s management led by its new CEO, Salil Parekh.

And Infosys’ steady March quarter numbers, which met market expectations, its decision to sell a contentious subsidiary acquired by his predecessor (Panaya) and a largely stable guidance for FY19, all seem to point to a slow and but sure return to matching industry growth rates.

 

 

Client additions, key metrics such as utilisation and volumes, traction in key verticals have all been healthy, though attrition has increased continuously for the past three quarters.

During the fourth quarter, the company’s revenues increased by 1.8 per cent sequentially in dollar terms, while net profits declined by 28.2 per cent. The fall in profit was as a result of the reversal of income-tax expense of $225 million in December 2017 quarter.

Healthy client additions

In a seasonally weak quarter, Infosys managed volume (person months billed) growth of 1.1 per cent, and also managed an increase in realizations. Utilisation continues to be healthy, at 84.7 per cent.

The company added four customers in the $25 million category and one each in the $50 million and $75 million buckets, which suggests that the management transition hasn’t affected client traction.

Two large verticals − Manufacturing & Hi-tech, and Energy, Utilities, Communications − grew at a pace that was faster than the overall company’s revenue rate. Banking and Retail segments grew marginally. Thus growth has been reasonably broad-based for Infosys.

Attrition, at 19.6 per cent, continues to increase steadily and may be a cause for concern for the company.

Breaking from the past

Infosys has guided for a 7-9 per cent revenue growth rate for FY19, bang in line with the trade body Nasscom’s projected rate for the industry. By putting its subsidiary, Panaya, on sale (expected by March 2019), the company wants to steer clear of all the contentious issues surrounding its acquisition.

By bringing focus back on its core offerings and giving an increasing digital thrust to its service lines, Infosys looks set to achieve its guidance.

Dividend payouts, which were historically quite conservative, have also seen an increase. In fact, with the special dividend of ₹10 announced, the yield has risen to a heady 3.7 per cent, when 2 per cent used to be the ‘normal’ level.

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