Infosys Ltd. met its revenue and margin guidance for the ongoing fiscal, buoyed by large deal wins and increased client appetite for spending on technology as businesses moved online during the pandemic. But revenue growth for the quarter ended March came in at 2%, below street estimates, whereas margin and net profit contracted sequentially. The company also announced a buyback, according to stock exchange filings.
"With Infosys' Q4 earnings being below expectations and the lack of positive surprise to earnings by large players like TCS and Infosys, we believe that the earnings cycle has peaked for now," UBS wrote in its first-cut post the earnings. "This could prompt a negative reaction. Buyback should offer downside support for the stock."
Infosys' American Depository Receipts fell 6% in the early hours of trade on the back of the earnings disappointment.
Infosys ADR falls as much as 6% post its fourth quarter results. The ADR is down for the third straight day. #Q4WithBQ #BQStocks
April 14, 2021
Read: https://t.co/t2msBLGjzT pic.twitter.com/PnbRaz33A0Guidance
The Bengaluru-based technology services company expects revenue buoyancy to continue in fiscal 2021-22 and has estimated growth of 12-14% in constant currency terms. The operating margin is forecast to be in the range of 22-24%, lower than the 24.5% upper end of FY21.Chief Financial Officer Nilanjan Roy said, in a press briefing on the earnings, that the company will be undertaking another round of salary hikes in July after having taken one in January this year. "Coupled with return to travel and marketing costs, our (margin) guidance is still higher than that in FY20," he said.
Q4 Highlights (QoQ)
Revenue of India's second-largest software services provider rose 1.5% over the preceding quarter to Rs 26,311 crore in the quarter ended March, according to its exchange filing. That compares with the Rs 26,510-crore consensus estimate of analysts tracked by Bloomberg.
Q4 revenue in U.S. Dollar terms rose 2.8% to $3,613 million.
Whereas, revenue growth in constant currency terms stood at 2% for the quarter ended March (sequential growth) and at 5% for FY21.
- Net profit fell 2.3% to Rs 5,078 crore, against the Rs 5,171-crore forecast.
- Operating income or Ebit fell 2.3% to Rs 6,440 crore. The consensus estimate for the same stood at Rs 6,532 crore.
- Ebit margin fell 90 basis points to 24.5% against 25.4% owing to wage hikes and cross-currency headwinds.
- The company crossed a revenue milestone of Rs 1 lakh crore in FY21.
At the press briefing, Infosys Chief Operating Officer UB Pravin Rao said although there is some volatility in large deals, overall deal wins are at an all-time high.
Deal wins for FY21 stood at a record $14.1 billion. For the quarter, the company won deals worth $2.1 billion. "A strong momentum exiting FY21, alongside a focused strategy to accelerate client digital journeys, gives us confidence for a stronger FY22," Managing Director and Chief Executive Officer Salil Parekh was quoted as saying in the company statement.
66% of the deal wins in FY21 were net new deals, according to Rao. The number during the fourth quarter stood at 54%.
Other highlights for the quarter:
- Digital formed 51.5% of the total revenue.
- Attrition for the quarter stood at 15.2% as compared to 10% in December.
- Added 32 new $100 million+ clients during the quarter as against 29 in December.
- North America continues to contribute 61.6% to the company's overall revenue.
The Infosys board also approved a final dividend of Rs 15 per share. Together with the interim dividend of Rs 12 already paid, the total dividend per share for FY21is a 54% increase over FY20, the company said.
Shares of Infosys, listed as American Depository Receipts, fell as much as 6.36% to $17.24 in early trading on Wall Street. The ADRs have declined over 10% in the last three sessions.
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