Balancing growth from its ‘bread and butter’ outsourcing business, with new areas such as automation, acquisitions and management techniques, Infosys has beaten market expectations, upped its US dollar revenue guidance, and started showing early signs of getting back into the growth path.
India’s second largest exporter has revised its FY16 US dollar revenue growth guidance upward in the range of 7.2-9.2 per cent on a yearly basis, from the earlier guidance of 6.2–8.2 per cent, indicating that the ‘Renew and New’ strategy is in early stages of yielding results.
Analysts had a positive view too. According to Dipen Shah, Head of Private Client Group Research, Kotak Securities, Infosys has achieved significant progress in its quest of ‘New and Renew’, with extensive training to employees and implementation of projects in emerging areas including design thinking, artificial intelligence and automation.
Vishal Sikka, CEO and MD, said that in the area of design thinking, some 45,000 employees have been trained till date.
“The several realignments and acquisitions made in the last few quarters, to enhance the top line and bottom line, have finally offset the disruption caused by the exit of its co-founder-leaders,” said Sanjoy Sen, Doctoral Research Scholar, Aston Business School.
In terms of volume, it grew 5 per cent, highest in the last 19 quarters, indicating a strong pipeline, higher utilisation (which stood at 75.7 per cent), an increase of 290 basis points (2.9 per cent) on a quarterly basis, and six large deals signed with a contract value of $688 million. Also, its largest client crossed $300 million and 2 other clients were added in the $200-million bucket.
Margins hit However, investments made have had an impact on margins, which came down 170 basis points or 1.7 per cent in the quarter to 24 per cent.
Industry watcher Shah believes that these investments should help Infosys sustain and improve growth rates in the future while sustaining margins, and this is just a temporary blip.
Also, currency volatility impacted forex, which resulted in a $3-million loss, according to CFO Rajiv Bansal.
Sector-wise, FSI grew 2.8 per cent, manufacturing grew 5.4 per cent, retail grew 7.3 per cent and energy, utilities and communication services grew 2.6 per cent. North America contributed 63.2 per cent of the revenues. However, contribution from Europe went down to 22.4 per cent in this quarter.