Infosys results: Sikka struggles with Q4 execution in a bad IT market

Unanticipated execution challenges, distractions in a seasonally soft quarter affected performance

Infosys reported a 2.8 per cent decline in net profits to Rs 3603 crore for the quarter ended on March 31, 2017. The company’s revenues dipped by 0.9 per cent to Rs 17120 crore during this period.      

India’s second largest software exporter said the company reported a poor performance in Q4 due to execution challenges and seasonal headwinds.  

Infosys reported an operating margin of 24.6 per cent during the fourth quarter.

For the whole year FY17, Infosys net profits grew 6.4 per cent to Rs 14353 crore on revenues of Rs 68484 crore.

Infosys chief executive Vishal Sikka admitted that he is still struggling to execute his strategy of building a software-led services company and distractions such as founder N R Narayana Murthy’s outburst over salary hike to chief operating officer Pravin Rao also contributed to the dip.

“Unanticipated execution challenges and distractions in a seasonally soft quarter affected our overall performance. At the same time, we continued to see many positive signs of our strategy execution; our software-led offerings continued to show strong momentum and client success, with continued adoption of Mana, our AI platform; Zero Distance marked its 2-year anniversary as a grassroots cultural movement for innovation with strong client resonance,” said Vishal Sikka in a statement.

The Bengaluru-based bellwether forecast revenue guidance of 6.5 per cent to 8.5 per cent for fiscal 2018, indicating that the woes for Indian IT services firms continue.The company has forecast 23 to 25 per cent operating margin for this fiscal.  With this growth forecast, the software major’s aspirational target to reach $20 billion revenue and 30 per cent margin by 2020 seems an uphill task.

The growth guidance by Infosys largely indicates the overall industry’s growth as Indian IT services look at a bigger challenge due to H1B visa restrictions in its largest export market US apart from the transition to digital and cloud. Its global rival Accenture, however, reported 8 per cent growth in outsourcing services, which potentially indicates there is a shift by clients to move from focusing on the front end through digital projects to the backend, where there is a need for traditional IT services.

Infosys has appointed independent director Ravi Venkatesan, who has been on the Board since April, 2011, as the co-chairman. “Ravi will help me enhance the board engagement in supporting the management in execution of company’s strategy,” said R. Seshasayee, Chairman of the Board.

The company reported a net addition of 601 employees in the fourth quarter.

Infosys stock dropped 2.29 per cent or Rs 22.15 at Rs 946.65 at 10.02 am on the Bombay Stock Exchange.