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Home / Companies / Company Results /  Infosys Q4 net profit rises 10% but FY20 guidance disappoints: 10 key takeaways

IT major Infosys today reported a net profit of 4,074 crore for the quarter ended March 31, 2019, a growth of 10% year-on-year, helped by strong growth in its key financial services segment and large deal wins during the period. That came above the Street's estimates of 3,956 crore. Revenues for the quarter rose to 21,539 crore, a growth of 19.1% year-on-year and 0.6% quarter-on-quarter. Infosys margins however narrowed to 21.4% in the the March quarter of FY19, as compared to 24.7% in the same quarter of the previous year. Infosys shares closed 0.50% higher today. The IT company announced its earnings after today's market hours but what disappointed the Street is the company's growth guidance for this fiscal.

Here are 10 key takeaways from Infosys Q4 earnings:

1) For the new fiscal year starting April 1, Infosys has guided for a constant currency revenue growth between 7.5% and 9.5%, which is largely below Street estimates.

2) For the fiscal year ending March 31, 2019, Infosys reported a constant currency growth of 9%.

3) Infosys CEO and MD Salil Parekh termed the results as strong on multiple dimensions including revenue growth, performance of digital portfolio, large deals and client metrics. "Our planned investments have started yielding benefits. As we look ahead into fiscal 2020, we plan to deploy various measures of operational efficiencies across the business," he said.

4) For the financial year 2019, its board recommended a final dividend of 10.50 per share.

5) For FY20, Infosys guided for an operating margin of 21%-23%. And for FY19 operating margin was at 22.8%.

6) In dollar terms, Infosys reported a revenues of $3,060 million in Q4, up 2.4% quarter-on-year and 9.1% year on year. In constant currency terms, revenues grew 11.7% year on year in constant currency. This is the second consecutive quarter of double-digit growth in constant currency.

7) In Q4, digital revenues rose to $1,035 million (33.8% of total revenues), a year-on-year growth of 41.1% and sequential growth of 9.7% in constant currency.

8) The company's attrition rate however rose to 20.4% in the March quarter. “Overall attrition remains high and we are continuing our focus on arresting the same," COO Pravin Rao said.

9) Infosys also reported strong deal wins during the quarter. Large deal signings rose to $1.57 billion in the March quarter, taking the overall large deal wins to $6.28 billion for FY19. “We had another quarter of over $1.5 billion large deal TCV (total contract value) in Q4, as a result of which FY19 TCV doubled over FY18. Realization per billed employee was steady which reflects increasing usage of automation in core services and faster growth in newer digital services," said COO Pravin Rao.

10) Sanjiv Bhasin, executive VP for markets and corporate affairs at IIFL, said going forward margins of IT companies could remain under pressure due to pricing pressure on commoditised services and wage inflation due to higher onsite hiring though volume growth may remain strong. "Technology has been an over-owned sector but going forward we are more optimistic on domestic cyclicals that can offer better value propositions," he said.

“The stock returns for IT companies can be muted from here after a strong performance in the past 12 months," Kotak Institutional Equities said in a recent note.

Meanwhile, Tata Consultancy Services Ltd (TCS), India’s largest IT services company by revenue, ended fiscal 2019 with double-digit revenue growth as the company reported a 11.4% growth in constant currency terms in the fiscal ending 31 March.

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