IT major Infosys has trimmed its FY24 guidance from 1-3.5 per cent to 1-2.5 per cent as woes of reduction in discretionary spending and delay in decision-making continue to persist amid uncertain macro-environment. Albeit, revenue growth beat market expectations, and profits fell in line. 

The net profit for the quarter stood at ₹6,212 crore, a 3.2 per cent rise year-on-year (YoY). On a quarter-on-quarter (QoQ) basis, profit rose 4.5 per cent from ₹5,945 crore last quarter. On a YoY basis, revenue from operations rose 6.7 per cent at ₹38,994 crore. Sequentially, revenue marginally increased by 2.8  per cent.

Salil Parekh, CEO and MD, said, “The discretionary and the large transformation programmes have reduced significantly, and decision-making continues to be slow. The volumes are still under constraint and the guidance is given based on these factors.”  

Infosys’ outlook for the rest of the year remains soft and cautious as it continues to see the impact of the downturn in telecom, high-tech, retail, and areas of payments, investment banking in the financial services sector. Even so, the manufacturing and life sciences sectors continue to be upbeat, Parekh said. 

The total contract value of large deals in the quarter stood at $7.7 billion, with 48 per cent net new growth, significantly higher than $2.3 billion last quarter. Parekh said “The large and mega deals are positioning us very well for the future. We see the ramp-ups towards the back end of the year and even some of those the ramp-ups and starts will get pushed up.” 

Operating margin down

Operating margin for the quarter stood at 21.2  per cent, a decline of 0.3 per cent YoY and an increase of 0.4 per cent. Margin guidance, however, has been retained at 20-22 per cent.

“Our operating margin demonstrates the early benefits of the recently unveiled margin improvement plan and is a clear reflection of our ability to continuously identify opportunities for improving operational efficiencies”, said Nilanjan Roy, CFO. The company has also declared an interim dividend of ₹18 per equity share.

Wage hike from Nov

Infosys’ total headcount fell by 7,530 employees, higher than last quarter, from 3,36,294 in Q1 to 3,28,764 in Q2. Voluntary attrition during the quarter fell to 14.6 per cent from 17.3 per cent, last quarter. Wage hikes will be rolled out on November 1 for all employees. In terms of fresher hiring, Roy said the company will not be going to the campuses, as it has room for utilisation given robust fresher hiring in the last financial year. 

“The earnings are in line with market expectations but the company trimming its revenue guidance would be negative for the stock. Overall results are not so bad but discounted in prices. FY24 guidance - revised downwards would put pressure on prices to sustain while it has maintained margins,” said Prashanth Tapse, Senior V-P (Research), Mehta Equities Ltd.