Infosys on Friday said it was expecting to close 2018-19 (FY19) on a much stronger note than it had estimated, reflecting the growing optimism of the current management.
The Bengaluru-based company has given the guidance that it will close the fiscal year with a revenue growth rate of 8.5-9 per cent, taking it closer to double-digit growth, which its larger rival TCS has projected for FY19. At the beginning of the year, the IT giant, which is now helmed by former Capgemini veteran Salil Parekh, had given an initial outlook of 6-8 per cent growth in constant currency, which it had maintained even during the preceding quarter.
However, the improved growth outlook has come with its own set of concerns because the net profit as well as the profit margin during the quarter has taken a hit owing to a host of factors which are mostly internal.
In the quarter ended December 31, 2018, Infosys reported a 29.62 per cent fall in its net profit at Rs 3,610 crore compared to the corresponding period of the previous fiscal year while on a quarterly basis it declined 12.2 per cent.
This was attributed to a higher corporation-tax outgo of Rs 1,522 crore in the quarter because the company reversed the tax expense provision it had under a deal with the US government under the advance pricing agreement. Its decision to declassify assets such as Panaya and Skava also impacted its net profit as the company had to take a hit of Rs 539 crore on its net income numbers.
The company, however, reported healthy top line growth in the quarter with revenues growing at 20.3 per cent on a YoY basis at Rs 21,400 crore while sequentially they rose by 3.8 per cent. In constant currency terms, revenues saw double digit growth of 10.1 per cent on a YoY basis and 2.7 per cent sequentially.
In dollar terms, the revenues were at $2.987 billion, a growth rate of 8.4 per cent over the corresponding period last year and 2.2 per cent sequentially.
The sequential growth of the company in both dollars and constant currency was better than that of TCS in the third quarter of FY19.
TCS witnessed a growth rate of 0.67 per cent on a sequential basis to $5.25 billion in dollar terms. The Mumbai-based firm's constant currency revenue saw 1.8 per cent growth sequentially.
“We had a fairly strong quarter with a strong pipeline of contacts. This gives the confidence of increasing our revenue guidance for the whole fiscal year. Also, we expect double-digit growth of 10.1 per cent in constant currency terms this financial year,” said Salil Parekh, managing director and chief executive officer.
He said client spending remained robust with changes in buying behaviour, hinting at a good traction in the large deal space.
In the quarter under review, Infosys witnessed a 3 per cent rise in its financial services vertical in sequential terms, contributing 32.5 per cent of its total revenue. The energy, utilities, resources and services vertical saw a 6.9 per cent rise in sequential terms, while it was 7.2 per cent in the manufacturing vertical.
“We have reported growth across verticals. Especially, in the BFSI (banking, financial services, and insurance) space, we have witnessed strong growth in North America,” said Pravin Rao, chief operating officer. Infosys's digital revenue grew 5 per cent in sequential terms to touch $942 million during the quarter.