Beating market expectations, Infosys reported a 13 per cent rise in net profit to ₹3,250 crore in the third quarter of this fiscal. This was fuelled by strong demand from its clients in the US, reflected in high volume growth, its best in three years.
The net profit grew 5 per cent over the previous quarter.
Contrary to analysts’ expectations that Infosys would marginally prune its annual guidance forecast of 7-9 per cent revenue growth for the financial year ended March 31, 2015, as a result of currency fluctuations, the IT major maintained the guidance.
Commenting on the company’s performance, Vishal Sikka, CEO and Managing Director, said: “We are excited about our breakthrough results in Q3, especially with margins, utilisation and volume growth achieved, despite it being the weakest quarter for us traditionally with holidays and client furloughs.
“Our ‘renew and new’ strategy is being received well by our clients and our ecosystem, and we are already seeing its early adoption.”
He, however, cautioned that pricing decline which was significant in Q3 could continue over the subsequent quarters.
“Infy results were in line with our expectations. Margins were ahead of our estimates and we believe the focus on ‘renew and new’ is the right approach for sustained profitable growth” said Ashish Chopra, IT Analyst at Motilal Oswal Securities.
Volumes at 3-year high Infosys witnessed its highest volume growth in three years, at 4.2 per cent quarter-on-quarter (QoQ) and 11 per cent year-on-year (YoY); employee utilisation (excluding trainees) touched an all-time high in 11 years at 82.7 per cent; and operating margins were 26.7 per cent, an increase of 60 basis points over the previous quarter. The company added 59 clients during the quarter as against 49 last quarter, and added a net of 4,227 employees, a hundred more than last quarter, taking its headcount at the end of Q3 to 1,69,638 employees.
The company decided to make a 100 per cent variable payout to all employees for Q3, the second time in a row after Q2. It has also expanded its Innovation Fund from the current $100 million to $500 million. Sikka said this fund was separate from its M&A resources and would be used to invest in start-ups and partnerships globally with focus on Indian ventures.
Attrition up
Attrition continued to increase at 20.4 per cent this quarter from 20.1 per cent in Q2 despite several employee engagement measures initiated by Sikka and his team over the past five months.
Asked why attrition continued to plague the company, Sikka said: “While the last twelve months trailing numbers does not reflect it, there has been a marked reduction in employees who left the company — from 10,600 who left in Q1, we saw it drop to 10,100 in Q2 and 8,900 this quarter. However, we would like to get this number down further and will get to the levels of 12-14 per cent attrition over the next few quarters.”