Infosys, the country’s third largest IT services exporter, announced that its first-quarter revenue has risen 4.5% to $2.26 bln vs expectations of $2.22 bln, beating the expected revenue.
Against an expected sequential growth of 2.9% in constant currency, Infosys reported an actual growth of 4.4% in constant currency.
Analysts expectations were for a 2.9 per cent sequential rise in constant currency.
Infosys has a target of 10-12% growth in constant currency terms in the current financial year. A growth of over 3% in the first quarter makes it easier for the company to achieve the goal, while anything below 2.5% makes it difficult.
Tata Consultancy Services reported a 3.5% rise in constant currency terms for its first quarter revenue.
Year on Year growth was 10.9% — slightly below the target of 10-12%.
The performance of the company has been clearly above expectations, a welcome break from about a year ago when Infosys used to miss estimates and expectations with its quarterly results.
Volume growth in Q1 was 5.4% quarter on quarter.
In rupee terms, revenue was 14,354 cr, 7% up from last quarter, beating estimates. In terms of year on year comparison, revenue was up 12.4% in rupee terms. Net profit was Rs 3,030 cr, down from 3,097 cr last quarter.
Infosys was expected to post a net profit of Rs 3,019 crore on sales of Rs 14,066 crore.
ATTRITION
Quarterly annualized attrition for Infosys Limited at 14.2% compared to 23.4% in Q1 15.
Total number of employees who left Infosys voluntarily or involuntarily rose to 8,553 from 7,922 in the previous three months. Attrition was considerably lower than the same quarter last year, when 10,637 people had left the company.
Net addition of employees was 3,336 compared to 6,549 in the previous three months.
TURNAROUND
The strong growth posted by the company is in stark contrast to the below-expectation numbers reported by its biggest rival and analysts-favorite Tata Consultancy Services Ltd.
While TCS has been disappointing investors for more than a year with its quarterly earnings, Infosys has beaten expectations for the last 2-3 quarters, indicating that the company is now firmly on the path of turnaround.
Much of the credit will go to Vishal Sikka, a veteran from SAP who joined about a year ago, and N Narayana Murthy, who had the vision to bring Sikka onboard despite the latter being from a pure products background. Infosys is largely a services company.
SEGMENTS
Interestingly, growth was seen in both ‘keep the lights on’ services such as testing and ADM, as well as in more discretionary services such as package implementation and consulting.
In the intellectual-property-led business, the ‘others’ category has been showing consistent growth.
Read the full report here: INFYS_update
OUTLOOK
The Company’s did not change its outlook for the fiscal year ending March 31, 2016.
Infosys expects revenues to grow 10%-12% in constant currency and by 11.5%-13.5% in rupee terms. It is assuming a an exchange rate of 63.65 per dollar for rest of the fiscal 2016.
ANALYSTS POSITIVE
Analysts were particularly pleased with the strong volume growth as well as the impressive attrition number. Attrition level was expected around 18%, but has come in lower.
However, a large section of analysts who were bearish on the stock have been forced to eat humble pie, and many are still holding out saying that the performance is just a flash in the pan and cannot be sustained. TCS has been the analysts’ favorite for some time, though Infosys too has some old-time fans in the community.
[socialpoll id=”2283818″]
DETAILS
“I am very pleased with our performance in the first quarter. Our efforts in redesigning our clients’ experience and our widespread adoption of innovation, both in grassroots and breakthroughs, are starting to bear fruit in large deal wins and in the growth of large clients”, said Dr. Vishal Sikka, CEO and MD.
“While we are still early in our journey to become the leading next-generation services company, this gives us good momentum for the rest of the year.”
“The organization realignment made earlier this year for deeper client and operational focus has resulted in strong volume growth”, said Mr. U. B. Pravin Rao, COO.
“We continued the roll out of employee engagement initiatives around collaboration and simplification of internal processes in order to retain the industry’s best talent.”
“We are operating within our stated margin band, balancing strategic investments and client focus with operational efficiencies”, said Rajiv Bansal, CFO. “Pricing environment is competitive which we are addressing through automation and improvement in productivity.”