Q3 results: Infosys ups FY16 dollar-revenue guidance

Image: Vivek Prakash / Reuters

India's second-largest IT-services company Infosys on Thursday cheered the markets by posting an encouraging set of numbers for the quarter ended December 31, 2015. But, what catapulted its share price by 5 percent during Thursday’s morning trade was its increase in full-year (FY16) revenue guidance, affirming the IT major’s transformational story.
 
The Bengaluru-based IT company revised its FY16 revenue guidance to 12.8-13.2 percent (in constant current terms) from its earlier estimate of 10-12 percent announced during the fourth quarter results of the last fiscal.

Typically, for companies with large overseas business operations, constant currency growth is seen as an indicator of real growth. IT firms use this method to eliminate the effects of exchange rate fluctuations while calculating financial results.

For the third quarter ended December, Infosys reported revenue of $2.40 billion, while its net profit was $524 million, up 0.9 percent sequentially.

In rupee terms, Infosys recorded a net profit of Rs 3,465 crore during the December quarter, up 2 percent quarter-on-quarter.

Revenue was up by 1.7 percent sequentially at Rs 15,902 crore during the same period.
 
The announcement comes at a time when the IT firm's first non-founder CEO and managing director Vishal Sikka is scripting a recovery story, focusing on newer technologies such as artificial intelligence, analytics and mobility and is looking to create a differentiating model in an otherwise highly commoditised Indian IT industry.

In the quarter under review, Infosys recorded a 0.6 percent sequential rise in dollar-revenue growth, ahead of its larger rival TCS, whose quarterly dollar revenue fell by 0.3 percent during the same period.
 
Many brokerage houses had expected Infosys to post a modest sequential dollar-revenue growth of around 1 percent during the third quarter of the current fiscal. Some analysts indicated a marginal 0.35-1 percent sequential decline in dollar revenue.

Typically, for the export-heavy Indian IT industry, the October-December stretch is a seasonally weak quarter.
After last few fiscals of sluggish growth, Infosys has managed to maintain its growth momentum during the last three quarters of the current fiscal.

“We are seeing Infoscions becoming innovators, bringing innovation and client value to each individual project. This confidence can only come from a culture of learning and empowerment, and this is the kind of company we are endeavouring to create," said Vishal Sikka, CEO and MD, Infosys, in a statement put out by the company.

He further added, “Alongside grassroots innovation, we continue to see growing adoption of our Aikido services, bringing the power of intelligent systems, automation and software to amplify the skills and imaginations of our people. This combination helped us deliver encouraging results despite the traditional seasonality of the quarter and the additional headwinds, and will strengthen the execution of our strategy towards consistent profitable growth.”

The IT firm recorded a volume growth of 3.1 percent sequentially.

“The healthy volume growth this quarter has been encouraging. The lesser working days and our investments into additional trainees resulted in softer pricing and utilisation for the quarter,” said UB Pravin Rao, president and COO, Infosys. “Our continued focus on employee engagement is paying dividends resulting in lower attrition. We continue to simplify our policies and enable greater agility within the company, with the goal of boosting our productivity.”
 
Net addition of employees during the December quarter stood at 5,407. The company had 1,93,383 employees as of December 31, 2015. Attrition rate (standalone basis) during the October-December quarter stood at 13.4 percent compared to 18.2 percent a year ago.