Moneycontrol Bureau
IT major Infosys started off the financial year on a tepid note, missing analysts' estimates on revenues for the June quarter and reporting a net profit on expected lines. A bigger disappointment for the market was the lowering of constant currency revenue guidance for the year.Quarterly net profit declined 4.5 percent sequentially to Rs 3,436 crore and revenue increased 1.4 percent to Rs 16,782 crore.
Revenue in dollar terms grew by 2.2 percent to USD 2,501 million and constant currency dollar revenue growth stood at 1.7 percent compared with preceding quarter.
"We had unanticipated headwinds in discretionary spending in consulting services and package implementations as well as slower project ramp-ups in large deals that we had won in earlier quarters, resulting in a lower than expected growth in Q1," Vishal Sikka, CEO and MD said in company's filing to the exchange.
The company lowered its constant currency revenue growth guidance to 10.5-12 percent from 11.5-13.5 percent. This is slightly similar to NASSCOM's industry guidance of 10-12 percent."Brexit impact is not factored into FY17 guidance that is based on our own visibility of market," Sikka said.
Lower guidance was due to weaker spend in consulting and macro economic uncertainty, Sikka said while addressing press conference, adding the company lost more than 1 percent due to consulting. It has maintained margin guidance of 24-26 percent for the medium term.
Profit was estimated at Rs 3,447 crore (down 4.2 percent) on revenue of Rs 17,089 crore (up 3.25 percent) for the quarter. Dollar revenue was expected at USD 2,547 million, according to average of estimates of analysts polled by CNBC-TV18.
"Miss on revenue growth is not the best way to start the year," Nilesh Shah of Envision Capital said, adding the meeting guidance can now be a bit of challenge for the company. Karan Taurani of Dolat Capital expects recovery in growth in Q2 but Brexit will have major impact.
Infosys's earnings before interest and tax (EBIT) in Q1 fell 4 percent to Rs 4,047 crore and margin contracted by 138 basis points to 24.12 percent compared with preceding quarter, which were slightly above estimates due to controlled operational expenses. Selling and marketing expenses increased only 1.2 percent and administrative expenses declined 2.2 percent on sequential basis. A CNBC-TV18 poll estimated EBIT at Rs 4,076 crore and margin at 23.85 percent for the quarter.
Vishal Sikka said deal wins for the June quarter crossed USD 800 million in total contract value (TCV).
Infosys added 34 clients during the quarter, taking total count to 1,126 at the end of June 2016. It added 3 clients in USD 100 million category, taking total count to 17 and 3 clients in USD 10 million category, taking total count to 180.
"Our client additions and top client growth was strong during the quarter. Automation continues to be a core lever in the renewal of our traditional service offerings," UB Pravin Rao, COO said.
Utilisation rate including trainees improved to 76.5 percent in Q1FY17 from 74.7 percent in Q4FY16 and the same excluding trainees also improved to 80.5 percent from 80.1 percent QoQ.
Another reason for worry was the spike in its attrition rate (annualised) to 21 percent in the quarter ended June 2016 from 17.3 percent in preceding period and 19.2 percent in year-ago period.
Infosys added 3,006 employees during the quarter, taking total employees count to 1.97 lakh.
| Geographical segment | QoQ (%) | Constant Currency (%) |
| North America | 2.5 | 2.4 |
| Europe | 0.6 | -0.3 |
| India | -7.6 | -8.2 |
| Rest of the World | 6.9 | 4.9 |
| Industry segment | QoQ (%) | Constant Currency (%) |
| Financial services & insurance | 2.2 | 1.7 |
| Manufacturing & hi-tech | 2.9 | 2.4 |
| Retail & life sciences | 1 | 0.7 |
| Energy, utilities, communications & services | 3.1 | 2.4 |
During the quarter, the company made an investment in Trifacta, a leading provider of data wrangling software that enables non-technical users to easily transform data for analysis. It will provide a data wrangling solution for the Infosys Information Platform (IIP) and Infosys' other platforms & offerings.
Meanwhile, Infosys' global head of Mana & CIS, Samson David has resigned, according to sources that told CNBC-TV18 yesterday. Mana is company's knowledge based artificial intelligence platform.
At 10:20 hours IST, the scrip of Infosys was quoting at Rs 1,065.00, down Rs 110.85, or 9.43 percent amid high volumes on the Bombay Stock Exchange.
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