Infosys Q1 Result | Profit rises 3.2% YoY to Rs 5,360 crore; revenue jumps 23.6% to Rs 34,470 crore

The growth in revenue beats the estimates of 21.5 – 22.5 percent growth forecasted by the Moneycontrol.com poll.

“Our strong overall performance in Q1 amidst an uncertain economic environment is a testament to our innate resilience as an organization, our industry-leading digital capabilities and continued client-relevance as we continue to gain market share and see a significant pipeline driven by our Cobalt cloud capabilities and differentiated digital value proposition”, said Salil Parekh, CEO and MD.

The revenue growth was broad based across the business verticals, however, supply side challenges and higher travel costs, dented the margins for the company.

Constant currency revenues

The revenues in constant currency (CC) witnessed a year-on-year growth of 21.4 percent while on a sequential basis, the growth in CC revenues was 5.5 percent. The company’s revenues from digital businesses, which accounted for 61 percent of the total revenues, grew by 37.5 percent on year in CC terms.

The growth in revenues was driven by double-digit year-on-year growth achieved across all business verticals in constant currency terms.

The large deal TCVs during the quarter stood at $1.7 billion.

Segmental revenues

Financial services continue to be the largest contributor to the company’s revenues at 30.6 percent. However, its contribution reduced by 240 bps from the year ago period and 70 bps from the previous quarter.

Retail continue to be a stable business, which contributed 14.5 percent of the total revenues while the contribution from the communication vertical improved 80 bps on year to 13 percent. Energy, Utilities, Resources & Services continue to maintain their contribution at 12.4 percent continue while the contribution from manufacturing vertical improved 240 bps on year to 12.1 percent. Hi-Tech, Life Sciences and Others too remained stable with their contribution to total revenues of the company.

Geographical contribution

North America remained the biggest business generating region as it accounted for 61.8 percent of the total revenues generated during the quarter. Europe generated 25 percent of the revenues, which were up 80 bps on year while the share of Rest of World dipped 60 bps on year to 10.6 percent. India operations generated 2.6 percent of the revenues for Infosys.

Client Addition

The company added 106 clients to its folds during the quarter, taking the total number of active clients to 1,778.

Infosys had 38 clients in the $100-million-plus category at the end of the quarter, 69 clients in $50-million-plus basket, 278 clients in $10-million- plus and 877 clients in $1-million-plus basket.

Its top five clients contributed 13 percent of the total revenues, top 10 clients generated 20.8 percent while 36.3 percent of the total revenues were generated by its top 25 clients.

Margins

Infosys continued to be impacted by supply-side pressures, rise in wages and travel costs as well as decline in utilization due to increased share of fresh employees. Consequently, the operating margins of the company tanked 360 bps on year to 20.1 percent. Sequentially, operating margins were down 140 bps.

The utilization levels during the quarter (including trainees) dipped 570 bps on year to 77.6 percent. Sequentially the decline was 240 bps.

Excluding trainees also, the company witnessed a dip in its utilization levels to 84.7 percent from 88.5 percent a year ago and 87 percent during the previous quarter.

Employees & attrition

The total employees at the end of the quarter stood at 3,35,186 compared to 3,14,015 employees at the end of March ending quarter.

The LTM (Last 12 months) attrition during the quarter continue to edge higher and was recorded at 28.4 percent compared to 27.7 percent in the previous quarter and 13.9 percent during the same period a year ago.

“We are fueling the strong growth momentum with strategic investments in talent through hiring and competitive compensation revisions”, said Nilanjan Roy, Chief Financial Officer. “While this will impact margins in the immediate term, it is expected to reduce attrition levels and position us well for future growth while we continue to optimize various cost levers to drive efficiency in operations”, he added.

Guidance

The company has increased it FY23 revenue guidance to 14-16 percent while the margin guidance was retained at 21-23 percent.

“We are investing in rapid talent expansion while ensuring rewarding careers for our employees, to better serve evolving market opportunities. This has resulted in a strong performance in Q1 and increase in FY 23 revenue guidance to 14%-16%”, added Parikh.

On Friday, shares of Infosys settled at Rs 1506.30 apiece on the BSE, down 1.73 percent, while the Benchmark Sensex ended 390.28 points or 0.70 percent higher at 56,072.23. The stock has declined 5.3 percent over the past one year but is trading higher by 4.8 percent over the past one month.