Infosys posts 9.8 percent year-on-year growth in Q2 profit, CFO resigns

Image: Reuters

Vishal Sikka, CEO and MD, Infosys

Infosys, India’s second-largest IT-services company, on Monday recorded a stellar performance for the quarter ended September, setting a positive tone for the IT-earnings season of the July-September quarter. The Bengaluru-based firm posted a 6 percent sequential dollar revenue growth, the highest in the last 16 quarters, keeping its transformational story intact. 

Many brokerage houses had expected the IT firm to record dollar-revenue growth in the range of 3.6 to 4 percent during the second quarter of the current fiscal. After several quarters of sluggish growth, Infosys, for the last two quarters of FY16, has posted earnings that are ahead of the Street expectations.

During the July-September stretch, Infosys recorded revenues of $2.39 billion, up by 6 percent quarter-on-quarter (QoQ) and 8.7 percent year-on-year (YoY). In dollar terms, net profit rose by 9.1 percent quarterly at $519 million. In rupee terms, Infosys recorded a net profit of Rs 3,398 crore during the quarter, up by 12.1 percent sequentially and 9.8 percent YoY. Revenue rose by 8.9 percent QoQ at Rs 15,635 crore during the September quarter.
 
Typically, for the export-heavy Indian IT industry, the July-September stretch is a seasonally strong quarter as client budgets for IT spends starts to ramp up.

However, the software-services company lowered its FY16 dollar revenue growth outlook to 6.4 to 8.4 percent from its earlier forecast of 7.2 to 9.2 percent.

Shares of Infosys were down 2.91 percent at Rs 1,133.90 a piece during morning trade at the Bombay Stock Exchange, as broader markets were flat coupled by reasons such as the resignation of the company’s CFO and lower dollar revenue guidance for the current fiscal.

While announcing the quarterly results, Infosys said chief financial officer (CFO) Rajiv Bansal would be replaced by Ranganath D Mavinakere (aka “Ranga”). The company said in a statement that Mavinakere has been appointed CFO and key managerial personnel effective October 12, 2015. Prior to the announcement, Mavinakere held the role of executive vice president and the head of strategic operations looking after strategy planning, risk management, corporate marketing, and M&A. An IIM-Ahmedabad alumnus, with a Master's degree from IIT-Madras, Mavinakere was the chief risk officer (CRO) at Infosys from January 2008 to July 2013.

“We are experiencing a once-in-a-generation opportunity for a services company to help businesses maximise their potential with technology. While results in any one quarter are transitory snapshots of a long journey, we do see our focussed execution along our strategy starting to produce encouraging results for our clients, shareholders and Infoscions,” said Vishal Sikka, CEO and MD, Infosys.

Ever since Sikka took over as CEO in August 2014, he has been focusing on newer technologies such as big data, analytics and mobility. Over the last year Sikka has been looking to revive the company’s growth engine  led by innovation across all its services, including automation and artificial intelligence in the highly commoditised Indian IT industry.

The board declared an interim dividend of Rs 10 per share.

“We had strong all-round growth during the quarter driven by recent initiatives around service differentiation, improvement in client mining and higher focus on winning large deals. Increase in revenue productivity was significant, volume growth was robust, client metrics and utilisation improved while attrition remained stable,” said UB Pravin Rao, COO, Infosys.  

During the September quarter, the company signed five large deals with total contract value of $983 million. It added 82 clients during the period, taking its  total number of clients to over 1,000.

The IT major retained its revenue guidance of 10 to 12 percent growth for FY16 over the previous fiscal in constant currency terms. For companies with large foreign operations, constant currency growth is seen as an indicator of real growth. Software services firms use this method to eliminate the effects of exchange rate fluctuations while calculating financial results.

Net addition of employees during the quarter stood at 8,453. The company had a total workforce of 1,87,976 people as of September 30. Attrition rate (annualised consolidated) during the July-September period stood at 19.9 percent compared to 24.8 percent a year ago.