Bengaluru, NFAPost: India’s Infosys Ltd on Sunday missed profit estimates because of surging costs as the second largest IT company of the country registered a consolidated net profit of Rs 5,360 crore for the first quarter ended June 2022, up 3.2% year-on-year from Rs 5,195 crore recorded in Q1FY22.
The Refinitiv data had expected an estimated rise of 56.26 billion rupees. This has been the sombre profit stories of IT companies including TCS, HCL Technologies and Wipro, who missed their estimates as well in the first quarter.
The company also missed on profit estimates due to a drop in the clinching of large deals by nearly 35 per cent to $1.7 billion rupees. It also registered a drop in gross addition of clients from 113 to 106 this quarter compared to last year.
Sequentially, the profit declined 5.7% in the said quarter as against a profit of Rs 5,686 crore in Q4FY22.
However, the company registered 20.1% operating margins for June quarter, down 3.6% YOY as overall expenses increased more than 29%. But Infosys retained its operating margin guidance for the full year at 21 to 23%.
“The company was making investments in talent through hiring and competitive compensation revisions, which will impact margins in the immediate term, Nilanjan Roy, chief financial officer,” Infosys said in a statement.
However, Infosys has increased its FY23 revenue guidance to 14-16% while the margin guidance was retained at 21-23%.
“We are investing in rapid talent expansion while ensuring rewarding careers for our employees, to better serve evolving market opportunities. This has resulted in a strong performance in Q1 and increase in FY 23 revenue guidance to 14% to 16%,” CEO and MD Salil Parekh said.
Infosys also delivered a robust performance in Q1 with year-on-year growth at 21.4% and sequential growth at 5.5% in constant currency.
Year-on-year growth was in double digits across all business segments in constant currency terms.
Digital accounted for 61.0% of overall revenues, growing at 37.5% in constant currency.
Operating margin for the quarter was 20.1%, with Free Cash Flow conversion at 95.2% of net profit.
“Our strong overall performance in Q1 amidst an uncertain economic environment is a testament to our innate resilience as an organization, our industry-leading digital capabilities and continued client-relevance. We continue to gain market share and see a significant pipeline driven by our Cobalt cloud capabilities and differentiated digital value proposition,” Parekh said.
On a quarter-on-quarter (QoQ) basis, revenues were up 6.8 percent from Rs 32,276 crore registered during the last quarter of FY22.
“We are fueling the strong growth momentum with strategic investments in talent through hiring and
competitive compensation revisions. While this will impact margins in the immediate term, it is expected to reduce attrition levels and position us well for future growth. We continue to optimize various cost levers to drive efficiency in operations,” Chief Financial Officer Nilanjan Roy said.
“Continued high focus on cash led to strong FCF to net profit conversion at 95.2% and improvement in ROE to 31.0%,” he added.
Talking about the attrition, the total employees at the end of the quarter stood at 3,35,186 compared to 3,14,015 employees at the end of March ending quarter.
The LTM (Last 12 months) attrition during the quarter continued to edge higher and was recorded at 28.4% compared to 27.7% in the previous quarter and 13.9% during the same period a year ago.
“We are fueling the strong growth momentum with strategic investments in talent through hiring and competitive compensation revisions,” Roy said.
“While this will impact margins in the immediate term, it is expected to reduce attrition levels and position us well for future growth while we continue to optimize various cost levers to drive efficiency in operations,” he added.
