 "Sikka delivers, again")
Infosys delivered a strong set of numbers for 2015-16 apart from issuing a healthy revenue growth guidance for 2016-17 well ahead of the industry's estimated growth rate.
The Bengaluru-based information technology services company that counts Bank of America, Citibank, Volvo and Apple among its clients, said it was expecting its revenue growth in 2016-17 to be 11.5-13.5 per cent in constant currency, higher than industry body Nasscom's growth guidance of 10-12 per cent.
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The lower end of Infosys' growth guidance was ahead of closest competitor Cognizant. For calendar 2017, Cognizant has issued a revenue growth projection of 9.9-14.3 per cent, anticipating softness in demand, especially in financial services and health care.
In the quarter ended March 31, 2016, Infosys reported a 16.2 per cent rise, year-on-year, in its net profit at Rs 3,597 crore, while revenue grew 23.4 per cent to Rs 16,550 crore.
According to data compiled by Bloomberg based on averages of analysts' estimates, Infosys was projected to report Rs 3,520 crore in net profit and its revenue was expected to be Rs 16,480 crore.
In dollar terms, Infosys' net profit at $533 million grew seven per cent, year-on-year, while revenue grew 13.3 per cent in the reported currency. During the quarter, Infosys signed deals with a total contract value of $757 million. Growth during the quarter was aided by a 2.4-per cent rise in billed man-hours.
"Infosys' 2016-17 revenue guidance implies a healthy 3-3.7 per cent compounded quarterly growth rate," equity analyst firm Prabhudas Lilladher said in a report. "The guidance reassures the Street that the company is back to industry-leading growth."
Despite the decline in the rate at which the company bills clients, Infosys managed to show a 60 basis point (a basis point is a hundredth of a percentage point) improvement in its operating margin over the previous quarter to 25.5 per cent.
A favourable currency, improvement in employee utilisation and lower payments to subcontractors helped Infosys improve its margin.
Investors received the Infosys news positively with the American Depositary Receipt (ADR) of the company rising 8.07 per cent or $1.49 to a year high of $ 19.94 at 2100 hours on the Nasdaq. Indian stock exchanges were closed on Friday on account of the festival Rama Navami.
Employee utilisation, including trainees, improved by 50 basis points over the previous quarter to 74.7 per cent. For the full year, Infosys posted Rs 13,491 crore in net profit, up 9.4 per cent over 2014-15, while revenue grew 17.1 per cent to Rs 62,441 crore. In dollar terms, net profit at $2.052 billion grew 1.9 per cent while revenue at $9.501 billion grew at 9.1 per cent.
Vishal Sikka, chief executive officer and managing director, said these were early days with a new strategy starting to show results.
"These heartening results are still based on metrics of the past, of the way the industry has been. The world of our future looks entirely different. In that sense, we are still very much at the beginning of this journey," he said.
Among concern areas, growth in the key financial services vertical was nearly flat during the quarter, while business in North America, Infosys' largest market, grew 0.5 per cent.
"We have undertaken some 54 significant initiatives. A lot is on our table now and we need more leadership bandwidth to handle those," added Sikka.
