Infosys’s net jumps 21%, guidance raised

Company expects annual revenue to climb 2-3%; to award promotions, increments, incentives in Jan.

The Infosys Ltd. logo is displayed on security tape at the company's campus in Electronics City in Bangalore, India, on Monday, Jan. 27, 2013. Infosys, India's second-largest software exporter, raised its annual sales growth forecast for the second consecutive quarter as economic recovery prompts clients in Europe to spend more. Photographer: Vivek Prakash/Bloomberg

Infosys on Wednesday reported second-quarter net profit jumped 20.5% from a year earlier to ₹4,845 crore, helped by better margins. The information technology services provider also raised revenue growth estimates to 2-3% for the full year.

Consolidated revenue from operations rose 8.6% to ₹24,570 crore in the three months ended September.

‘Deal momentum rises’

The deal momentum picked in the quarter, Infosys told the media. The period saw large deals totalling $3.15 billion. Digital revenues grew 25.4%, accounting for 47% of the total business.

A cut in discretionary spending, reduction in travel expenses and savings from ‘work from home’ helped lift the operating margin by 370 basis points to 25.4%.

“We had a substantial Q2 across multiple dimensions: client impact, digital scaling, growth and operating margins,” said Salil Parekh, CEO and MD.

Buoyed by the strong order book, Infosys revised its revenue growth guidance upwards to 2-3% in constant currency for fiscal 2020-21, from 0-2% last quarter.

Raises margin forecast

The operating margin guidance too was revised upwards for the year, to 23-24%, against 21-23% earlier.

High-tech, life sciences and financial services grew strongly from a year earlier and on a sequential basis; banking and finance recorded positive growth. But retail and manufacturing will take time to come back, said COO, Pravin Rao.

An increase in free cash flows in the first half was driven by a “focus on liquidity and cash management”, said CFO Nilanjan Roy. Consequently, Infosys decided to raise the interim dividend per share by 50% to ₹12. Heartened by the results, Infosys said it would give out 100% variable pay, wage increments as well as one-time special incentives to employees effective January.

“The quantum of hikes will be identical to the previous years,” added Mr. Rao.

He said attrition fell “dramatically this quarter and we put tremendous focus on employee engagement. However, once growth comes back fully, we may not be able to sustain this level of attrition”.

The quarter saw voluntary attrition in IT services declining to 7.8%, from 18.3% in the year-earlier period.