Moneycontrol PRO
you are here: HomeNewsBusiness

COVID-19 likely to hit Infosys’ growth numbers in FY21

Project terminations, pricing pressure and deferrals will impact profitability and revenue.

May 31, 2020 / 06:43 PM IST
  • bselive
  • nselive
Todays L/H

COVID-19 will hit Infosys’ profitability and growth in FY21 as it sees project terminations, bankruptcy and pricing pressure from clients.

In a Securities and Exchanges Commission filing, Infosys said, "Many of our clients’ business operations have been negatively impacted due to the economic downturn, resulting in postponement, termination, suspension of some ongoing projects with us and/or reduced demand for our services and solutions."

While some of these risks materialised towards the end of FY20, Infosys said it will continue to impact in FY21, with more consequences.

Client issues

Some of the clients may file for bankruptcy, which will affect the collection of revenues that are yet to be billed. "Our profitability may be marginally impacted as some clients may dispute some of the existing work-in-process that has been recognised by us as unbilled revenues. This, in turn, can impact our cash flows negatively,” the statement added.

COVID-19 Vaccine

Frequently Asked Questions

View more
How does a vaccine work?

A vaccine works by mimicking a natural infection. A vaccine not only induces immune response to protect people from any future COVID-19 infection, but also helps quickly build herd immunity to put an end to the pandemic. Herd immunity occurs when a sufficient percentage of a population becomes immune to a disease, making the spread of disease from person to person unlikely. The good news is that SARS-CoV-2 virus has been fairly stable, which increases the viability of a vaccine.

How many types of vaccines are there?

There are broadly four types of vaccine — one, a vaccine based on the whole virus (this could be either inactivated, or an attenuated [weakened] virus vaccine); two, a non-replicating viral vector vaccine that uses a benign virus as vector that carries the antigen of SARS-CoV; three, nucleic-acid vaccines that have genetic material like DNA and RNA of antigens like spike protein given to a person, helping human cells decode genetic material and produce the vaccine; and four, protein subunit vaccine wherein the recombinant proteins of SARS-COV-2 along with an adjuvant (booster) is given as a vaccine.

What does it take to develop a vaccine of this kind?

Vaccine development is a long, complex process. Unlike drugs that are given to people with a diseased, vaccines are given to healthy people and also vulnerable sections such as children, pregnant women and the elderly. So rigorous tests are compulsory. History says that the fastest time it took to develop a vaccine is five years, but it usually takes double or sometimes triple that time.

View more

The company is also anticipating client’s move to shift the outsourcing in-house to cut down spending, which could impact its operations.

In terms of geography too, the company is bracing for an impact as the economic slowdown or other factors may affect the economic health of markets such as the US, UK and the European Union (EU), where the company’s revenues are concentrated.

In fiscal 2020, 61.5 percent, 24.1 percent and 11.8 percent of the company’s revenues were derived from projects in North America, Europe and the rest of the world, respectively.

The virus outbreak has also impacted its key industries financial services industry, retail, consumer goods, energy and manufacturing. Financial services account for about 31.5 percent of the overall revenue. As the uncertainty around the economic growth remains, these likely to have an impact on its revenue and profitability.

All this forces the company to alter its internal offerings, talent mobility and marketing efforts need to capture opportunities in areas such as increased adoption of cloud-based offerings, digital services and cybersecurity services.


Wage pressures in India and the hiring of employees outside India are also likely to impact its margins.

“Although a vast majority of our current workforce is based in India, we have recently increased and expect to continue to increase hiring in other jurisdictions, including the US, UK, Continental Europe and Australia,” the company said.

“This increase has been driven, in part, by recent indications that immigration regulations in these countries could undergo significant changes. Such hiring has resulted and could further result in overall increased wage costs thereby impacting profitability,” the statement added.

The company also expects lawsuits from employees alleging potential health risks as they resume office operations. Delayed honouring of offers due to COVID-19 is likely to affect its brand negatively, the company said.

Moneycontrol News
first published: May 31, 2020 06:43 pm