Infosys came out with mixed results for the third quarter of FY17 with revenues meeting street expectations while profits grew 7 per cent to ₹3,708 crore (₹3,465 crore) but the IT major tweaked the revenue guidance, after reducing it two times in the previous two quarters.
The revenue guidance was revised downwards to 8.4-8.8 per cent from 8-9 per cent in constant currency terms. In dollar terms, revenue guidance came at 7.2-7.6 per cent in dollar terms (based on the US dollar on December 31). In the beginning of the 2017 fiscal, the country’s second largest exporter had guided for an annual growth of 10.8–12.3 per cent.
On the issue of the H-1B visas, CEO and Managing Director Vishal Sikka pointed out that as the US President-elect himself is an entrepreneur, he expected that the policies of the administration will be friendly towards business and innovation, he said.
“Of course, visa and immigration-related policies may change in the US. We are on a watchful mode and need to wait and see how things will happen there,” Sikka said.
Infosys’ performance was lauded by Harit Shah, analyst, Reliance Securities. Despite losing RBS contract performance in BFSI vertical which saw a 0.2 per cent q-o-q increase is a key positive, he said. The impact of RBS was one per cent of its revenues (around ₹172 crore). Revenues on a sequential basis came at ₹17, 273 crore, which was a 6 per cent increase compared with the second quarter of the fiscal. On a year-on-year basis, revenues declined by 0.2 per cent.
In the last financial year, its revenues grew 9.1 per cent, signalling at the time that it had got its mojo back.
However, since then the company has had to face a combination of macroeconomic factors (Brexit and policy changes expected from the new US President Donald Trump) and getting software engineers to align more with client’s needs. In the beginning of this year, Sikka wrote in an email to employees that certain initiatives that he initiated since taking over at the helm from August 2014 are yet to make significant impact.
Some of these issues are showing up in the results. Geography-wise US dipped by 0.6 per cent sequentially, business from Rest of World down 1.5 per cent and India fell by 0.1 per cent in the same period (in constant currency terms). Only Europe grew by 1 per cent.
A JP Morgan report pointed out that just financial services grew despite the RBS contract loss, while all other verticals declined sequentially.
New Deputy COOInfosys announced the appointment of Ravikumar S as Deputy Chief Operating Officer reporting to Pravin Rao, Chief Operating Officer, with immediate effect. In addition to his current responsibility of heading the global delivery, Ravikumar will oversee certain strategic business enabling functions.
The silver lining came from improvement in margins due to efficiencies from initiatives like ‘Zero Distance’ and better employee utilisation.
Operating margin improved 0.2 per cent or 20 basis points to 25.1 per cent in the third quarter, compared with 24.9 per cent in the second quarter. Infosys added 77 new clients in the third quarter, taking the total number of customers to 1,152.