Infosys to announce Q4 results on Monday; here's what to expect

"We expect revenues to grow 0.2 per cent quarter-on-quarter (QoQ) in constant currency terms (presuming 1 per cent hit due to Covid-19), said ICICI Securities.

Infosys, according to analyst estimates, is expected to take a 1 per cent QoQ hit in its revenue growth in constant currency (CC) terms for the March quarter of FY20 (Q4FY20) due to disruptions caused by Covid-19 lockdown. The IT major is slated to announce its March quarter results on Monday, April 20.

The earnings before interest, tax, depreciation, and amortisation (EBITDA) margin is expected to be stable, while the impact of lower billing and utilisation decline due to Covid-19 disruptions are expected to be offset by rupee depreciation, lower variable compensation payout, and lower travel costs, analysts say.

"We expect revenues to grow 0.2 per cent quarter-on-quarter (QoQ) in constant currency terms (presuming 1 per cent hit due to Covid-19). With cross-currency acting as a headwind of 30 basis points (bps), US$ revenue may witness a marginal dip of 0.1 per cent QoQ to $3,240 million," notes ICICI Securities in an earnings preview note.

The brokerage further says that the dollar appreciation would lead to rupee revenue growth of 1.7 per cent QoQ at Rs 23,479 crore. On YoY basis, the numbers are expected to grow 9 per cent. EBITDA is estimated to grow 14.9 per cent YoY and 2 per cent QoQ to Rs 5,916.6 crore while net profit or profit after tax (PAT) is seen at Rs 4,399.4 crore, up 7.9 per cent YoY but decline of 1.5 per cent on a sequential basis.

Edelweiss Securities sees a 9.3 per cent YoY revenue growth in rupee terms at Rs 23,542.9 crore. On a sequential basis, it is seen growing 2 per cent. The brokerage expects the company to report a constant currency decline of 0.5 per cent QoQ. "Cross-currency tailwinds will help offset some of this decline. We are building in a flat margin for Q4FY20E, as a strong dollar will support margins for the quarter," it added. Net profit is projected to remain flat YoY at Rs 4,072.9 crore. On a QoQ basis, it is seen falling around 9 per cent.

Among the key monitorables, investors will focus on revenue and margin guidance for FY21E, after baking in likely impact in Q1FY21E from Covid-19 and long term impact from likely slower client discretionary spending, deal win trajectory in wake of travel restrictions and pricing pressure.

"If Infosys does guide for the whole year, we expect a wider-than-usual revenue growth band of 2 per cent," says Kotak Securities. It also expects a widening of the margin guidance band to bake in potential changes to pricing through FY2021E. However, more than the guidance, assumptions will matter especially on the timing of recovery assumed in the guidance after a likely difficult June 2020; the way the company bakes the potential economic recession into its guidance, and assumptions on pricing, the brokerage said in its earnings preview report.

Infosys' peers Wipro and TCS have already announced their March quarter results. Wipro reported weak numbers for the quarter under review and refrained from giving any revenue guidance for the June quarter of FY21 due to uncertainties surrounding Covid-19. TCS, on the other hand, posted a mixed set of numbers, with the firm missing estimates on the revenue front even as it improved its operating margin in Q4FY20. Though earnings were less affected by the pandemic, the firm’s double-digit revenue growth streak, in constant currency (CC) terms, came to a halt.