Confident of meeting guidance for this year: Infosys CEO & MD Salil Parekh

Around 70 per cent of the deals won in this quarter were renewals, while the remaining were new contracts, says Parekh

Even as its net profit and margins were hit on account of a one-time impairment provision and higher tax outgo, the Infosys management on Friday exuded confidence of closing the financial year on a much stronger note. CEO and MD Salil Parekh, in an interview to Debasis Mohapatra and Yuvraj Malik, said the near-term visibility into the deal flow is quite robust, though the firm has a long way to go. Edited excerpts:

Infosys seems to be much more confident today than a year ago going by the revised guidance. Can you give some colour on the large order wins in this quarter, and pipeline seen in the future?

We had signed large deals worth over $2 billion in the second quarter (Q2), and added another $1.57 billion the third quarter (Q3). As of now, the pipeline is looking quite strong for us. Clearly, the macro environment is changing. But, in the very near future — which is this financial year — we are confident of achieving the (revenue) guidance we have given. Around 70 per cent of the deals won in this quarter were renewals, while the remaining were new contracts.

Your larger peer (read TCS) has flagged concerns around rising sub-contracting costs. Are you also seeing a similar pattern?

As of FY19, we have a strong demand in the market. Sub-contracting as percentage stands at around 7.3 per cent for us, which is higher than the past quarters. We are trying to build a model which understands and addresses this demand better. These things are not something that will be addressed in one quarter. We have taken a comprehensive approach to this issue, which we will work over the next several quarters.

Can you elaborate on the accounting treatment on Panaya and Skava, the assets that until recently were up for sale, and something which impacted your earnings negatively?

When we were holding these assets for sale, the intangible ones were not provided with depreciation. So, we had to take a $12 million additional hit towards depreciation. When we declassified Skava and Panaya (from ‘held for sale’), we had to remeasure them for recovery of value on the business model and (potential) repurposing of the business. 

Do you see further pressure on margins going ahead?

There was a one-time impact on the margins (owing to Skava and Panaya). Our focus from the beginning was to increase investments for driving sales. With this approach, we have expanded our sales capacity by putting more (resources) into digital apart from ramping up localisation in key markets. This is the plan we are executing to drive our sales momentum.