Infosys Q1 profit rises 1.4% to Rs3,483 crore

Infosys posts a net profit of Rs3,483 crore for the first quarter ending 30 June; for the 2017-18 financial year, the firm expects revenues to grow at 7.1-9.1%.

Infosys posted strong first-quarter numbers that beat market expectations, driven mainly by strong spending from top financial services and European customers. India’s second largest software services exporter also raised its full-year revenue guidance, halting a streak of three consecutive quarters when the company was forced to slash its revenue growth outlook.

An employee of Infosys stands at the front desk of its headquarters in Bengaluru.(Reuters)

For the 2017-18 financial year, Infosys said it expects to grow revenues at 7.1-9.1%, up from the 6.1-8.1% range it had forecast in April. Infosys maintained its constant-currency revenue forecast of 6.5-8.5%.

For the June quarter, Infosys’s dollar revenue came in at $2.65 billion, growing 6% from last year. Net profit stood at $541 million, compared to $511 million in the year-ago period. On a sequential basis, quarterly revenues grew 3.2%.

In rupee terms, revenues grew 1.8% to Rs17,078 crore, while net profit grew 1.4% to Rs3,483 crore.

Analysts on average were expecting Infosys to post quarterly revenue of about $2.64 billion, or Rs16,987.90 crore, according to Bloomberg estimates. Net profit was expected to come in at $531.94 million, or Rs3,429.60 crore.

“Our persistent focus on execution in Q1 is reflected in broad-based performance on multiple fronts—revenue growth, resilient margins despite multiple headwinds, healthy cash generation and overall business results. I am encouraged by the uptick in revenue per employee for six quarters in a row, and the strong momentum in our new high growth services and software, as we accelerate our focus on innovation-led growth,” said chief executive officer Vishal Sikka in a statement.

The upbeat quarterly numbers and forecast will provide temporary relief to CEO Sikka, who struggled with numerous challenges with the company’s performance last year, amid an unprecedented slowdown in India’s $154 billion outsourcing industry. Infosys’s strong numbers come a day after larger rival and market leader Tata Consultancy Services (TCS) reported underwhelming numbers that disappointed investors.

Infosys’s buoyant performance came during a quarter which has traditionally been a robust one for Indian IT firms, as top-dollar Fortune 500 clients typically allocate their annual technology budgets during the quarter.

While Infosys will be heartened by its latest results, experts cautioned that it may still be too early to say that the company has put all its troubles behind.

The past one year has not been kind to Infosys, as it has faced numerous challenges, some of which have been of its own making. Last year, the company was forced to slash its annual guidance during three consecutive quarters, eventually ending the year with actual revenue growth of 7.4% and constant-currency growth of 8.3% that fell short of its own estimates.

What made matters worse were a series of decisions by the company’s board—including the decision to hike the CEO and COO’s salaries—that attracted the ire of its founders, led by N.R. Narayana Murthy, who have since questioned the corporate governance standards of the company’s board and called for the resignation of chairman R. Seshasayee. In April, the board named independent director Ravi Venkatesan as co-chairman, a move that was widely seen as an attempt to placate the founders.

The spat with the founders has proved to be a distraction for the company’s top management, a fact that Sikka himself has conceded. More recently, Infosys has been hit by a lawsuit from a former US-based employee Erin Green, who has alleged employee discrimination, and also been rocked by the exit of company veteran Sandeep Dadlani—a man who was overseeing over a third, or $3.5 billion, of the company’s total revenues.

Infosys shares were trading up 1.45% at Rs990.50 on the Bombay Stock Exchange in early trade on Friday morning.

(Story published in arrangement with Livemint)