Too much focus on one quarter not a good idea: Vishal Sikka

Revised dollar revenue guidance, volume growth, falling attrition numbers aid

The Street cheered Infosys Q1 results today, propelling the stock higher by as much as 15% on the NSE.

The surge in the share price came as the company raised its dollar revenue guidance to 7.2-9.2%. Infosys had forecast an annual revenue of 6.2% to 8.2% in dollar terms in the last quarter. 

It, however, retained its annual sales guidance of 10-12% in constant currency. 

Revenue for the quarter at Rs 14,354 crore was up 7% sequentially, highest in the last 15 quarters, and 12.4% on a year-on-year basis. Net profit was up 5% on a year-on-year basis at Rs 3,030 crore, and declined 2.1% sequentially. US dollar revenues grew by 4.5% on a sequential basis. 

The first quarter numbers not only beat market estimates but was also one of the best for the company in many quarters. The volume growth at 5.4% was highest in 19 quarters. This was higher than TCS’ volumes that came in at 4.8%. 

What also brought relief to the street was a falling attrition. Infosys reported attrition of 14.2% for the quarter, compared to a 23.4% attrition in the same quarter last year. Utilisation too expanded by 160 bps to 80.2%. 

Despite wage hikes and visa costs, Infosys managed its margins better at 24%. Operating margins had a 170 basis points impact. 
 

“We are operating within our stated margin band, balancing strategic investments and client focus with operational efficiencies”, said Rajiv Bansal, CFO. “Pricing environment is competitive which we are addressing through automation and improvement in productivity,” he added.

While addressing the media CEO Vishal Sikka said: “Too much focus on a single quarter is not a good idea. We had a good second quarter last fiscal and a good third quarter too. We had a disappointing Q4 in FY15, which I look as an aberration. We brought focus on execution and that is evident in this quarter. There will be swings that will happen. We do see this as the beginning of the turnaround.”

During the quarter Infosys added 79 clients. It won six large deals with a total contract value of $688 million. It added two clients in the $200 million list and its largest client crossed the $300 million mark. 

Though the management sounded much more confident about its strategy and growth ahead due to a strong first quarter, U B Pravin Rao, COO said that the second quarter of the year is generally soft but they do see their new platforms and digital doing better.