Infosys Q4 result disappoints Street; net rises 7.8% to Rs 6,128 crore

Infosys' latest report card was a disappointment on several fronts - the company missed revenue guidance for FY23 hit by "unplanned project ramp downs and decision-making delays by some clients".

With global macroeconomic uncertainties looming, it has given a subdued 4-7 per cent revenue growth forecast for FY24, with top management cautioning that "the environment remains uncertain".

Infosys had last given single-digit revenue guidance in FY2019.

India's second-biggest software services firm posted 7.8 per cent year-on-year growth in consolidated net profit at Rs 6,128 crore in the January-March quarter.

But the profit fell 7 per cent when compared to the preceding October-December quarter.

The revenue growth in constant currency for FY23 came in at 15.4 per cent, lower than the guidance. Notably, during the Q3 earnings announcement in January this year, Infosys -- which competes in the market with Tata Consultancy Services (TCS), Wipro and other IT firms -- had raised FY23 revenue guidance to 16-16.5 per cent (against the previously projected band of 15-16 per cent).

Infosys' Q4 year year-on-year-growth was 8.8 per cent and the sequential decline was 3.2 per cent in constant currency terms.

Revenue rose 16 per cent year-on-year in the fourth quarter of FY23 to Rs 37,441 crore but represented a decline of 2.3 per cent when compared to December 2022 quarter.

Infosys expects to post revenue growth of between 4 per cent and 7 per cent for the current fiscal year ending March 2024, lower than analyst expectations.

The Bengaluru-based company sees FY24 operating margin in the range of 20-22 per cent.

The conservative guidance comes on the back of ongoing upheaval in the US banking system and an uncertain global economy.

On Wednesday, the country's largest IT services exporter TCS reported a 14.8 per cent increase in March quarter net profit at Rs 11,392 crore but flagged worries from its key market of North America.

Events like the fall of SVB and fears of contagion have impacted client sentiments in North America and the banking, financial services and insurance sector, in particular, leading to clients deferring spending, the Tata Group company had said.

Infosys results came below street estimates, and its CEO Salil Parekh Parekh attributed the Q4 show to a combination of unplanned project ramp-downs by some clients and delays in decision-making.

"In Q4, we saw changes in the market environment. We saw unplanned project ramp-downs in some of our clients, and delays in decision making which resulted in lower volumes. In addition, we had some one-time revenue impact," Parekh said during the earnings briefing.

"While we saw some signs of stabilisation in March the environment remains uncertain."

Parekh, however, asserted that Infosys' pipeline of large deals "is extremely strong".

"Several of them are mega deals, and several of them are opportunities, cost and efficiency programmes within clients, as well as consolidation opportunities," the Infosys top honcho said.

The board has recommended a final dividend of Rs 17.50 per equity share for the financial year ending March 31, 2023.

For the full year FY23, the net profit was up 9 per cent year-on-year at Rs 24,095 crore, while revenue was 20.7 per cent higher at Rs 146,767 crore.

"In Q4, we saw some ramp down which were unplanned across different sectors, we saw some in telco, some in high tech, and retail.

“And within financial services, it was in mortgages, asset management and investment banking...in those industries, we saw constraints.

“In addition to that, we saw a one-time impact in the quarter," Parekh explained.

Infosys' head count witnessed a net reduction of 3,611 employees in the March 2023 quarter as compared to the previous quarter, and the total workforce strength slipped to 343,234 as of March 31, 2023.

Infosys' voluntary attrition -- a metric keenly watched by analysts -- showed improvement, easing worries.

The attrition rate stood at 20.9 per cent in Q4 FY23 against 24.3 per cent in Q3.

During the briefing, Parekh also fielded questions on senior-level exits in the company.

Infosys has seen two president-level exits in a matter of months, with Ravi Kumar and Mohit Joshi leaving the company to join top-tier IT firms Cognizant and Tech Mahindra, respectively.

Parekh said the company has announced and rolled out an internal structure focused on delivery, after Ravi Kumar's exit.

"We are in a position to now roll out a structure for financial services, as we move ahead.

“Within Infosys, we have a strong leadership team so leaders are coming from inside, and we see more and more at the next level...leaders within the company will step up," Parekh said.