Infosys reported a beat on net profit on Tuesday when it declared results for the quarter ended September 30. But a cut in revenue guidance and no significant update on the CEO front could weigh on the software major's stock when it opens for trading on Wednesday.
The management is confident about finding Infosys next CEO as the proceedings have been already initiated. Board Chairman Nandan Nilekani has conducted a review of all the external investigations into certain anonymous complaints the company had previously received.
The stock closed 1.3 percent lower at Rs 926 on the BSE on Tuesday. It hit a low of Rs924 and an intraday high of Rs 947.50.
The stock is likely to open on a muted note and could even fall by 2-4 percent when it opens for trading on Wednesday, but downside looks limited due to the buyback scheduled for early November, suggest experts.
“Revenue guidance cut and no announcement on new CEO front can be negative news for the stock. It could correct by 2-4 percent; however, due to the buyback, the downside remains limited,” AK Prabhakar, HoR, IDBI Capital told Moneycontrol News.
Dipan Mehta, Member BSE & NSE said that he is bearish on the IT pack. If the stock trades in positive then use the bounce to exit the stock.
We have collated a list of key takeaways from Infosys Q2 results:
Net Profit:
The IT major reported 3.4 percent year-on-year (YoY) growth in the net profit to Rs 3,726 crore which was higher than a CNBC-TV18 poll of Rs 3,496 crores. It grew by 7 percent on a quarter-on-quarter basis.
Net profit grew by 7 percent sequentially to USD 578 million and on a YoY basis, it grew by 7.3 percent.
Operating profit:
The operating profit grew by 3.3 percent on a QoQ basis to Rs 4,246 crore for the quarter ended September. On a YoY basis, it grew by 1.4 percent.
Margins:
The September quarter operating margin stood at 24.2 percent, as compared to the 24.1 percent reported in the June quarter. The net profit margin improved to 21.2 percent compared to 20.4 percent recorded in the previous quarter.
Revenues:
The September quarter revenues in rupee terms grew by 2.9 percent to 17,567 crore which was slightly less than a CNBC-TV18 poll of 3.3 percent. On a YoY basis, it grew by 1.5 percent.
In dollar terms, revenues grew 2.9 percent on a QoQ basis to USD 2728 million for the quarter ended September 30. On a YoY basis, Infosys recorded a growth of 5.4 percent and 4.6 percent in constant currency terms.
Infosys declares dividend:
Board of Directors declared an interim dividend of Rs 13 per share, compared to an interim dividend of Rs 11 per share in FY 17.
The outlook for FY 2018:
The Company’s outlook for the fiscal year ending March 31, 2018, under IFRS is as follows:
Revenues are expected to grow 5.5 percent -6. percent in constant currency terms. Revenues are expected to grow 3-4 percent in INR terms based on the exchange rates as of September 30, 2017
Update on share buyback:
The Board, at its meeting on August 19, 2017, approved a proposal for the Company to buyback its fully paid-up equity shares of face value of Rs 5 each from the eligible equity shareholders of the Company for an amount not exceeding Rs 13,000 crore (approximately USD 2 billion).
The buyback offer comprises a purchase of upto 113,043,478 Equity Shares aggregating up to 4.92 percent of the paid-up equity share capital of the company at a price of Rs 1,150 per Equity share.
The company has published a public announcement on October 10, 2017, for the buyback of its shares through a tender offer and has submitted the Draft Letter of Offer to regulatory authorities for their comments.
CEO search and shareholder consultation:
The process of identifying the next CEO and shareholder consultation outreach have been initiated and are progressing well.
Review of Investigations:
The Chairman has conducted a review of all the external investigations into certain anonymous complaints the company had previously received.
The review covered a range of matters, including the acquisition of Israeli firm Panaya which was completed in February 2015 and the severance payments to former CFO Rajiv Bansal.
“I believe that all stakeholders acted out of a strong passion for Infosys, wanting what they believed to be the best for the company and to see it succeed. In light of my review of these matters, I am fully persuaded, as is the entire Board, that the conclusions of the independent investigations are correct," Nilekani, who took over as Chairman in late August, said.
"This Board and I are committed to the highest standards of professionalism and will deal promptly and decisively with any governance issues should they ever come up in the future," he added.
Growth In Industry Segment:
FSI grew 3 percent sequentially and 2.6 percent in constant currency terms, while MFG and HI-Tech grew by 2 percent sequentially and 1.2 percent in constant currency terms.
RCL grew by 2.6 percent sequentially and 1.7 percent in constant currency terms, and ECS grew by 3.9 percent sequentially, and 3 percent in constant currency terms.
Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
