Q4 results: Infosys predicts FY17 revenue growth ahead of industry projection

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For the fourth quarter of FY16, Infosys posted a 1.6 percent sequential rise in dollar-revenue growth

After lagging industry growth rate for the last few fiscals, India’s second-largest IT services company Infosys projected that its revenue growth in the current fiscal will outperform Nasscom’s expectation for the industry. On Friday, Infosys predicted a dollar revenue growth of 11.8-13.8 percent in FY17, higher than the 10-12 percent growth expected for the Indian IT sector.

Once considered the IT bellwether, over the last two to three fiscals Infosys has failed to record market-leading growth. But, post Vishal Sikka’s take over as the firm’s first non-founder CEO and managing director on August 1, 2014, the company has embarked on a recovery story by focussing on innovation and new technologies in an otherwise highly-commoditised Indian IT industry.

In constant currency terms, Infosys expects FY17 revenue to grow between 11.5 and 13.5 percent. Typically, for companies with large overseas business operations, constant currency growth is seen as an indicator of real growth. IT-services firms use this method to eliminate the effects of exchange rate fluctuations while calculating financial results. Analysts were expecting Infosys’ revenue growth forecast (in constant currency terms) to be in the range of 11-13 percent for FY17.

For the fourth quarter of FY16, Infosys posted a 1.6 percent sequential rise in dollar-revenue growth. Many brokerage houses had expected the IT firm to post a sequential dollar-revenue growth of about 2 percent during the period.

For the three months ended March 31, 2016, Infosys posted a revenue of $2.44 billion, while its net profit was $533 million, up 1.7 percent sequentially.

In rupee terms, the Bengaluru-based software services firm recorded a net profit of Rs 3,597 crore in the quarter, up 3.8 percent from the previous quarter. Revenue was up by 4.1 percent sequentially at Rs 16,550 crore in the three months.

For the full year ended March 31, the company’s net profit was up 9.4 percent year-on-year at Rs 13,491 crore, while revenue rose 17.1 percent to Rs 62,441 crore.

The encouraging revenue projection for the current fiscal comes at a time when Sikka is scripting a transformational drive by focussing on newer areas such as artificial intelligence, analytics and mobility.

“We started the year just two quarters into a strategy to completely re-imagine the notion of services and to transform Infosys. Over the course of this year, we saw this strategy, of bringing automation and innovation to our clients, on a foundation of learning and education, start to show results in the organic growth of our client relationships, in our win rates in large deals, and in the types of projects we are seeing in strategic areas where we never participated before,” said Sikka in a statement.

The new strategy of the IT major would be to create a “next generation services company”. Setting an ambitious target for the company, Sikka is looking at revenues of $20 billion by 2020.

“The world of our future looks entirely different—it is a world that is being fundamentally reshaped by digital technologies, and it is our endeavour to create great value for every business through solutions built on our Artificial Intelligence technology and open, cloud platforms,” Sikka noted.

Infosys said the board recommended a final dividend of Rs 14.25 per share for FY16.

The IT firm also announced the appointment of Mohit Joshi (head, financial services at Infosys and also head, Infosys Brazil and Mexico operations), Ravi Kumar S (chief delivery officer, Infosys) and Sandeep Dadlani (head of Americas and retail, consumer products group, logistics, automotive, aerospace, core and industrial manufacturing business) as new presidents of the company effective immediately.

For the March quarter, Infosys posted operating margin of 25.5 percent, an increase of 0.6 percent (or 60 basis points) sequentially. Net addition of employees stood at 661. The company had 1,94,044 employees as of March 31, 2016. Attrition rate (on a standalone basis) during the quarter stood at 12.6 percent. Twelve months ago attrition rate stood at 13.4 percent.

“Employee attrition reduced further in Q4, and is reflective of increased engagement with our people all through the year, and our steps to make Infosys an exciting place for the world’s best talent,” said UB Pravin Rao, COO, Infosys. “The momentum of large deal wins continued this quarter and bookings were strong.”