Infosys Q2 profit & operating performance beat estimates | 10 key highlights

Revenue from operations during the quarter grew by 6 percent sequentially to Rs 36,538 crore, while revenue in dollar terms increased by 2.5 percent quarter-on-quarter to $4,555 million

Infosys, the country's second-largest IT services exporter, has delivered better than estimated earnings growth, except topline, for the quarter ended September FY23 with robust order intake, on October 13.

The company has reported a consolidated profit of Rs 6,021 crore for the September quarter (Q2FY23), rising 12.3 percent compared to Rs 5,360 crore in the previous quarter. The figure was better than the CNBC-TV18 poll estimates of Rs 5,638 crore, driven by strong operating performance.

Revenue from operations during the quarter grew by 6 percent sequentially to Rs 36,538 crore, while revenue in dollar terms increased by 2.5 percent quarter-on-quarter to $4,555 million and the constant currency revenue grew at 4 percent in Q2FY23, which was below analysts' estimates.

According to the average estimates of analysts polled by CNBC-TV18, revenue in rupee terms was estimated at Rs 36,606 crore, while the dollar revenue growth was expected at 3.1 percent and constant currency at 4.6 percent.

Also read - Infosys board approves its fourth buyback program worth Rs 9,300 crore

"Infosys reported strong Q2 performance with year-on-year growth at 18.8 percent and sequential growth at 4.0 percent in constant currency. Year-on-year growth was in double digits across all business segments in constant currency terms," the company said in its BSE filing.

Digital, which comprised 61.8 percent of overall revenues, grew at 4 percent sequentially in dollar terms at $2,817 million.

While addressing a press conference after the earnings announcement, CEO and MD Salil Parekh said the digital segment continued to see a strong growth rate; however, he sees caution in Hi-tech & telecom businesses on the discretionary part of the pipeline. (reports CNBC-TV18)

"We saw strong growth in Europe & US during the quarter. We are being watchful given the developing macro environment," he said.

Infosys recorded robust large deal total contract value for the quarter at $2.7 billion, the highest in the last 7 quarters, against $1.7 billion in the previous quarter.

"Our strong large deal wins and steady all-round growth in Q2 reflect the deep relevance and differentiation of digital and cloud solutions for clients as they navigate their business transformation," Salil Parekh, CEO and MD said.

Also read - Infosys Q2 result: Net profit rises 11% YoY to Rs 6,021 cr; FY23 revenue guidance raised to 15-16%

Parekh said while concerns around the economic outlook persist, the demand pipeline is strong as clients remain confident in the company's ability to deliver the value they seek, both on the growth and efficiency of their businesses.

This is reflected in the revised revenue guidance for FY23.

The company has revised its constant currency revenue guidance to 15-16 percent for the current financial year FY23, from 14-16 percent earlier, where it raised the lower band of guidance to 15 percent from 14 percent earlier while keeping the upper band steady.

However, it lowered the upper end of operating margin guidance and expects operating margin for FY23 in the range of 21-22 percent, against 21-23 percent earlier.

The active clients at the end of the September quarter stood at 1,779, which increased from 1,778 at the end of the June period.

Also read - Infosys has let go of people working for other companies: CEO Salil Parekh

The company has added 1 client in the $100 million+ category, and eight clients were added to the $50 million+ band to 77 now.

It also added 3 clients in $10 million+ band and 18 clients in $1 million+ category.

The operating performance was quite strong for the quarter ended September FY23, with operating profit growing 13.9 percent sequentially to Rs 7,873 crore and margin expanded by 140 bps QoQ to 21.5 percent, ahead of CNBC-TV18 poll estimates which were pegged at Rs 7,520 crore and 20.54 percent, respectively.

"Operating margins in Q2 expanded sequentially by 150 bps, helped by operational rigor," Nilanjan Roy, Chief Financial Officer said.

Nilanjan Roy further said, "While supply-side challenges are gradually abating as reflected in the reducing attrition rates, they continue to exert pressure on cost structure."

The attrition rate for the quarter dropped to 27.1 percent, against 28.4 percent in the previous quarter.

Also read - Infosys adds over 10,032 employees in Q2, attrition falls sequentially to 27.1%

Its total employee strength at the end of September was 3.45 lakh, up significantly from the 3.35 lakh headcount at the end of June FY23.

Infosys has decided to buy back shares worth up to Rs 9,300 crore at a price of up to Rs 1,850 per share, which is at a 30 percent premium to Thursday's closing price.

"Board approved a proposal to buyback fully paid-up equity shares from the equity shareholders of the company, being 14.84 percent and 13.31 percent of its total paid-up capital and free reserves as on September 2022 (on a standalone and consolidated basis, respectively) for an amount, payable in cash, aggregating up to Rs 9,300 crore," the company said.

The buyback proposal is subject to shareholders' approval.

In line with the capital allocation policy, the board of directors has announced an interim dividend of Rs 16.50 per share, an increase of 10 percent over the FY22 interim dividend, the company said in its BSE filing.

The total amount of the interim dividend will be approximately Rs 6,940 crore. The company has fixed October 28 as the record date for the interim dividend.

The free cash flows for the quarter declined to Rs 4,752 crore, compared to Rs 5,106 crore in the previous quarter and consolidated cash & investments at the end of September FY23 stood at Rs 38,921 crore, up from Rs 34,854 crore as of June FY23.

Infosys said its subsidiary EdgeVerve Systems has acquired assets of Channel Bridge Software Labs which can augment EdgeVerve's TradeEdge offering with mobile-based sales force automation solutions.

The acquisition cost towards IP and contracts is Rs 1.42 crore. It excludes employee retention and performance bonus.

The acquisition is expected to complete during the third quarter of FY23, subject to customary closing conditions.

Established in 2014, Channel Bridge Software Labs is a provider of enterprise B2B connectivity and visibility solutions, e-commerce solutions and supply chain consulting and analytics services.