IT solutions provider Infosys' profit beat analysts' expectations, rising 4.9 percent to Rs 3,606 crore in July-September quarter but reduced full year revenue guidance considerably due to uncertain external environment.
Rupee revenue rose 3.14 percent to Rs 17,310 crore and dollar revenue was up 3.4 percent at USD 2,587 million on sequential basis, which were slightly ahead of estimates.
Dollar revenue growth in constant currency was 3.9 percent QoQ and volume growth at 4 percent for the quarter, which was far better than its closest peer TCS that reported 1 percent and 1.3 percent growth, respectively.
The country's second largest IT company slashed its revenue guidance for FY17 to 8-9 percent from 10.5-12 percent earlier in constant currency terms after considering performance of H2FY17 and near-term uncertain business outlook.
It reduced revenue guidance for the second consecutive quarter and that was expected as the company already warned about risks to guidance from RBS contract cancelation and softness in banking, manufacturing & retail segments.
"We focused on strong execution in Q2 with core IT services business showing good progress on the strength of innovation and operational initiatives. While we continue to navigate an uncertain external environment, we remain focused on executing our strategy and increasing momentum of software plus services model," says Vishal Sikka, CEO who sticks to 2020 revenue target of USD 20 billion.
He expects FY17 margin to be in range of 24-25 percent.
According to CNBC-TV18 poll, profit was estimated at Rs 3,500 crore on revenue of Rs 17,150 crore in July-September quarter. Dollar revenue was expected at USD 2,559 million.
The fall in operating expenses helped earnings before interest and tax (EBIT) jump 6.5 percent to Rs 4,309 crore and margin expand by 80 basis points to 24.9 percent on QoQ basis, which were ahead of estimates of Rs 4,182 crore and 24.4 percent, respectively.
"Operating cash flows for the quarter were healthy and we effectively navigated a volatile currency environment through prudent hedging," MD Ranganath, CFO says.
Utilisation excluding trainees improved by 200 bps sequentially to 82.5 percent and including trainees by 120 bps to 77.7 percent.
Sikka says the deal pipeline continues to be healthy with winning 6 large deals in Q2 worth USD 1.2 billion.
Infosys has added 78 clients in Q2, taking total to 1,136 active clients. It added 1 client in USD 100 million category and 2 clients in USD 50 million category.
North America business during the quarter grew by 2.7 percent sequentially in constant currency, Europe 3.7 percent, India 28.7 percent and Rest of the world grew by 5.2 percent.
Financial services and insurance segment in Q2 reported a 5.2 percent sequential growth in constant currency despite challenging environment due to low global interest rates.
Sikka says he sees muted growth for BFSI for the next few quarters as couple of headwinds are seen in couple of accounts, though he is very comfortable about segment growth for the long run.
He further says he expects good traction in healthcare, energy & utlities, telecom businesses but retail will be volatile.
Manufacturing & hi-tech segment grew by 2.1 percent; retail, CPG, logistics and life sciences segment 1.2 percent; and energy, utilities, communications & services (ECS) 7.3 percent.
Attrition rate during the quarter declined by 100 bps sequentially to 20 percent due to focus on retaining top performers but increased by 10 bps compared with year-ago period.
Its liquid assets including cash and cash equivalents and investments increased to Rs 35,640 crore during the quarter from Rs 33,212 crore in preceding period.
Infosys has declared an interim dividend of Rs 11 per equity share.
At 09:59 hours IST, the stock was quoting at Rs 1,027, down 2.38 percent after hitting a 52-week low of Rs 996.15.