Infosys beats street estimates; PBT rises 12% to Rs 5,792 crore in Q1

As compared to its peers TCS and Wipro, Infosys’ revenue growth remained higher
IT services major Infosys on Wednesday beat Street estimates with a 12 per cent rise in profit before tax (PBT), which stood at Rs 5,792 crore in the first quarter of financial year 2020-21 (Q1FY21), boosted by steady performance in most business verticals and geographies, and healthy order flow.

Sequentially, the firm’s PBT rose by 5.4 per cent, while its net profit rose 11.5 per cent YoY to Rs 4,233 crore. Though this was 2 per cent lower than the previous quarter.

Revenues at Rs 23,665 crore, grew 8.5 per cent YoY basis and 1.7 per cent sequentially. The firm’s dollar revenues stood at $3.12 billion, up 1.5 per cent in constant currency terms on a YoY basis. In sequential terms, it declined by 2 per cent. The Bengaluru-headquartered firm, which hadn’t provided revenue growth guidance at the beginning of the financial year citing Covid-19-related business uncertainties, also resumed the practice, becoming the first company in the sector to do so.  

The company projected its Q2FY21 revenues to grow between 0-2 per cent, signaling its control over business visibility in the short-term.

It also maintained its last fiscal’s operating margin guidance of 21-23 per cent for the current financial year.

Infosys’ larger peers Tata Consultancy Services and Wipro had also not given any estimates for this fiscal.

Infosys’ revenue growth was higher than its peers TCS and Wipro. TCS saw a 6.3 per cent dip in revenues, while Wipro witnessed a 4.4 per cent decline.

In Q1FY21, Infosys won $1.7 billion worth of large deals, and said the pipeline remained robust with uptick seen in key BFSI (banking, financial services insurance) and hi-tech verticals. Its digital revenues at $1.38 billion, constituted 44.5 per cent of its total revenues, growing 5.5 per cent in constant currency terms.

“We see a nice demand for our new area of services that we presented such as (offerings) in cloud, automation, workplace transformation, cyber security among others. Our deal wins in Q1 were robust and we see good activity in coming quarters,” said Salil Parekh, chief executive officer and managing director of the firm. “Our confidence and visibility for the rest of the year is improving driven by our Q1 performance and large deal wins,” he added.

Infosys also posted some smart gains on the operating margin front, which stood at 22.7 per cent. This was 220 basis points higher than the corresponding period last year, and 160 basis points higher over the previous quarter. “Operating margin expanded, driven by preemptive deployment of our strategic cost levers along with tactical opportunities triggered by the Covid situation,” said Nilanjan Roy, chief financial officer. There was no significant pricing pressure on the existing projects, he added.

Among the verticals, financial services grew by 2.1 per cent YoY, while hi-tech saw the highest growth of over 13 per cent during the period. Retail witnessed the maximum dip of 7.4 per cent.

“After initial softness in BFSI, it picked up towards the later part of the quarter. We expect the momentum to continue in the US and most of the European nations. In manufacturing and retail, it can’t go down further and is likely to improve in coming quarters,” said UB Pravin Rao, COO at infosys.

The IT major had a total headcount of 239,233, a fall of 3,130 staffers as compared to the previous quarter. However, the company saw a drastic drop in attrition during the period, as it reduced to 11.7 per cent from 20.2 per cent in the previous quarter. 

“We will, henceforth, report attrition in the IT services segment only, as most of our peers do,” added Rao. The company also said that all the 20,000 freshers to whom offers were issued during the campus season last year, would be onboarded towards the end of the year.

“Infosys reported a healthy set of Q1FY21 numbers both on the revenue and margin fronts. Further, the company’s Q1FY21 performance was better than TCS’s Q1FY21 numbers,” ICICI Securities said in a note.

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