Panaya investigation to guidance: Key takeaways from Infosys results

Infosys reported a 7% rise in consolidated net profit at Rs 3,726 crore for the quarter ended September 2017 (Q2FY18). The IT giant, however, cut its revenue guidance for FY18 to 5.5%-6.6%. This was the first quarterly earnings after Infosys’ co-founder, Nandan Nilekani, returned as the company's new non-executive chairman after the sudden resignation of then CEO Vishal Sikka earlier this year.
 
Here are the key takeaways from Q2 earnings
 
FINANCIALS: NET PROFIT AND REVENUE
 

Infosys reported a 7% quarter-on-quarter (QoQ) fall, and 3.4% year-on-year growth in consolidated net profit to Rs 3,726 crore for July-September quarter. Revenue during the quarter increased 2.9% to Rs 17,567 crore, while dollar revenue at Rs 2,728 crore missed analysts' expectations. Operational numbers, though, were ahead of estimates. EBIT (earnings before interest and tax) came in at Rs 4,246 crore versus Rs 4,111 (QoQ) and margin at 24.2% for the quarter.

 
“Our focus on improving operational efficiencies enabled us to deliver stable margins in the quarter and at the same time provide compensation increases and higher variable payouts to our employees.” said MD Ranganath, CFO, Infosys.
 
 GUIDANCE CUT
 
The company cut the FY18 constant currency revenue guidance to 5.5-6.5% from 6.5-8.5% earlier. Operational margin guidance remained unchanged at 23-25%. The management, in a press conference, post the announcement of Q2 numbers attributed this to typical business conditions in H2 seen across the IT sector. They added that the current company strategy is relevant and will continue.
 
PANAYA INVESTIGATION

 
Besides the strategy, the company also reaffirmed previous findings of external investigations pertaining to the Panaya acquisition. The management said that there is no merit to allegations of any wrongdoing in the same.
 
“I believe all stakeholders acted out of a strong passion for Infosys, wanting what they believed to be the best for the Company and to see it succeed. In light of my review of these matters, I am fully persuaded, as is the entire Board, that the conclusions of the independent investigations are correct,” Nilekani said.
 
He rejected the demand for publishing the full investigation report, which he said could impair cooperation.

 
CEO SELECTION
 
Contrary to expectation that Infosys may announce a new CEO, the management stayed silent on the prospective or final names of the next incumbent. The company, however, added that the process of selecting a new CEO has been initiated but did not provide any timeline for the announcement.