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BENGALURU: IT services major Infosys Ltd has been more ‘digital’ than ever in the last three years since Salil Parekh took over as the chief executive officer and managing director in January 2018. During this period, Infosys also implemented the ‘Live Enterprise’ model which is a practical approach to quickly evolve into a dynamic business environment. The implementation of this model has helped Infosys more than double its market valuation from $33 billion to $69 billion in those three years.

The Infosys stock rose 3% to hit a six-year high on Monday after it the company its board will on 14 April consider a share buyback proposal.

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After a strong performance by its larger peer Tata Consultancy Services (TCS) Ltd, all eyes are on Infosys's March quarter results now.

As per a consensus estimate of a Bloomberg survey, Infosys is expected to post a net profit of 5,210.90 crore and revenue of 26,557.50 crore for the fiscal fourth quarter.

Mint highlights five things to watch out for in Infosys’s fourth quarter (Q4) results that will be declared on 14 April, Wednesday.

FY22 revenue growth guidance

Revenue growth guidance of Infosys is closely tracked by investors and analysts as it sets the tone for the entire fiscal. Analysts expect Infosys to provide a revenue growth guidance of 12-14% in constant currency terms, with a buffer for potential future upgrades. Investors will closely monitor the reasons for the guidance and the company’s strategy to achieve it.

Revenue, EBIT margin

Infosys is expected to post a sequential revenue growth of 3-3.2%, led by a ramp-up of large deals and strong bookings of earlier quarters. “We note that March is a seasonally weak quarter for Infosys. We forecast EBIT margin decline of 115 basis points sequentially largely on the back of wage revision and lower utilization rates," Kotak Institutional Equities said. The December quarter’s utilization rate of 86% (excluding trainees) is unsustainable and will decline, it said.

"Expect a dip in margin due to wage hike and an increase in attrition," Motilal Oswal said.

Share buyback

Infosys has said it will consider on 14 April a share buyback proposal. Evidently, investors will monitor the quantum and details of the buyback programme. Nomura Research expects Infosys to announce a buyback in the range of $1.3-1.9 billion at a maximum price of 1,650 apiece which is equivalent to 1.5-2% of the outstanding equity. I

n 2017 and 2019, Infosys bought back shares worth 13,000 crore and 8,260 crore at 1,150 and 800 per share, respectively.

Large deals momentum

In December, Infosys won its largest deal ever from German automotive manufacturer Daimler AG at an estimated value of $3.2 billion. This is much bigger than the $1.5-billion Vanguard deal which was signed in August last year. Investors will monitor management commentary on deal pipeline and note the company’s ability to close and execute such deals.

“Deal wins will be robust but will decline from the previous quarter. We expect large deal TCV (total contract value) of $3 billion, down from $7.1 billion announced for the December 2020 quarter," Kotak Institutional Equities said.

Attrition and salary hikes

Analysts expect tier-I IT companies to highlight plans on addition to their workforce to meet higher demand. This combined with elevated utilization should lead to the strongest employee addition in recent past, Motilal Oswal said. Infosys managed to bring down its attrition to 10% in the October-December quarter, down from 15.8% in the same quarter of the previous year. However, this is still higher than TCS’s attrition rate which dropped to an all-time low of 7.2% in Q4.

Infosys's management has taken various steps in terms of re-skilling its workforce and offering soft incentives to address rising attrition levels. Therefore, the company’s ability to retain talent and contain the attrition numbers will be closely watched.

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