Infosys on Friday reported a strong revenue growth in the first quarter as it bagged more orders, and raised its guidance for FY20.

The IT services firm raised its revenue growth guidance for FY20 to 8.5-10 per cent in constant currency. Last quarter, it had said it expected a revenue growth of 7.5-9.5 per cent in FY20.

Reacting to the result and revenue guidance, the ADRs of Infosys jumped 7.8 per cent at $11.56 in early trade on Nasdaq. They were quoting at $11.39 at 8.30 pm IST.

MD and CEO Salil Parekh said Infosys had a good start to FY20, aided by a strong deal pipeline and digital revenue growth of 41.9 per cent.

For the quarter ended June 30, it reported a total contract value of $2.7 billion, one of its highest. This follows the $1.6 billion in total contract value in Q4 FY19. “This, coupled with strong growth in digital revenues, is a positive,” said Sanjeev Hota, AVP - Research at Sharekhan by BNP Paribas.

Infosys reported Q1 revenues of ₹21,803 crore, a 14 per cent growth over the previous year period. On a sequential basis, its revenue grew 1.2 per cent from ₹21,539 crore.

Net profit rose 5.1 per cent year-on-year to ₹3,802 crore. However, on a sequential basis, it fell 6.8 per cent from ₹4,078 crore in the March quarter.

The quarter also saw Infosys’ margins go down to 20.5 per cent from 23.7 per cent in the June 2018 quarter.

The company reported a 23.4 per cent attrition rate, up from 20.4 per cent in Q4 FY19. “Elevated attrition numbers continue to remain a sour point for the company,” said Hota.

Payout allocation hike

Infosys has made some changes to its capital allocation policy. From the current policy of paying up to 70 per cent of free cash flow back to shareholders, it has increased the payout to 85 per cent. However, this additional 85 per cent will be paid cumulatively over a five-year period through a combination of semi-annual dividends and/or share buyback and/or special dividends.

The company said it is on track to complete its previously announced share buyback of ₹8,260 crore. Till date it has bought back shares worth ₹5,934 crore.

 

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