Infosys' fourth quarter earnings barring bottomline missed analysts' expectations on Thursday. Even its FY18 guidance was lower than estimates but the announcement of Rs 13,000-crore payout through dividend or share buyback during the year and fall in attrition rate minimised losses in the share price. The stock fell 2.88 percent intraday.
The software services exporter has reported consolidated profit at Rs 3,603 crore for the January-March quarter, degrowth of 2.8 percent from Rs 3,708 crore in previous quarter. Revenue also fell 0.88 percent to Rs 17,120 crore on sequential basis.
"Unanticipated execution challenges and distractions in a seasonally soft quarter affected our overall performance," Vishal Sikka, CEO said.
However, he added that the company continued to see many positive signs of its strategy execution; software-led offerings continued to show strong momentum and client success and employee engagement continued to drive down attrition, especially with top performers.
Dollar revenue during the quarter stood at USD 2,569 million, a growth of 0.7 percent over previous quarter, which was slightly lower than analysts' forecast of USD 2,584 million.
According to average of estimates of analysts polled by CNBC-TV18, profit for the quarter was expected at Rs 3,570 crore on revenue of Rs 17,235 crore.
Infosys said its consolidated revenue for the fiscal year ending March 2018 is expected to grow 6.5-8.5 percent in constant currency. It was lower than analysts' forecast of 7-9 percent.
"Guidance has turned out to be below our base case scenario," says Morgan Stanley, adding that implied a growth of 2.1-2.9 percent QoQ over the next four quarters.
Motilal Oswal said marginally lower guidance seems an adjustment for Q4 revenue miss.
Revenue in dollar terms is expected to grow 6.1-8.1 percent and in rupee terms, the company expects revenue to grow 2.5-4.5 percent during the current financial year.
"Looking ahead, it is imperative that we increase our resilience to the dynamics of environment and we remain resolute in executing strategy, path to transform Infosys, and to drive long term value for all stakeholders," Sikka said.
The company has guided its EBIT margin for the year at 23-25 percent.
Consolidated earnings before interest & tax for the March quarter stood at Rs 4,212 crore, down 2.8 percent quarter-on-quarter and margin contracted by 49 basis points to 24.60 percent, which were also lower than analysts' estimates of Rs 4,270 crore and 24.8 percent, respectively.
Infosys during the financial year 2016-17 crossed $10 billion mark with revenue in dollar terms growing 7.4 percent at $10.2 billion. Revenue in constant currency grew by 8.3 percent, which was slightly lower than its guidance of 8.4-8.8 percent that revised thrice during the year from 11.5-13.5 percent.
Profit during financial year 2016-17 grew by 6.4 percent to Rs 14,353 crore and revenue increased 9.7 percent to Rs 68,484 crore compared with previous year.
The IT major has announced a final dividend of Rs 14.75 per share. Including this, aggregate dividend for financial year 2016-2017 amounted to Rs 25.75 per share, resulting in total payout of Rs 7,119 crore, it said.
The company has revised its capital allocation policy after taking into consideration the strategic and operational cash requirements in the medium term.
"Effective from financial year 2018, the company expects to payout up to 70 percent of the free cash flow of the corresponding financial year," Infosys said. Its current policy is to pay dividends of up to 50 percent of post-tax profits of the financial year.
In addition to the above, the board has decided to pay out up to Rs 13,000 crore (USD 2 billion) to shareholders through dividend or buyback during financial year 2017-18.
The above payout is nearly 20 percent net worth of the Infosys.
With 'add' recommendation for the stock, Kotak Institutional Equities said increase in payout ratio is a positive. Broadly this translates into 57-58 percent of net profit as payout ratio, it adds.
"We expect 4-6 percent cut in our FY2018-19 earnings estimates led by weaker than expected growth and change in exchange rate assumption to Rs 66.2 from Rs 68 earlier," Kotak said.
Infosys won 6 large deals worth $806 million during the quarter, adding one client in USD 100 million category & two in USD 50 million category in Q4FY17. "We added seven clients in USD 5 million category and one in USD 25 million category," it said.
Standalone attrition rate for the quarter dropped to 13.5 percent compared with 14.9 percent in previous quarter while consolidated attrition rate was down at 17.1 percent from 18.4 percent on better employee engagement.
Utilisation during Q4 reached 82 percent which is the highest in Q4 over the past several years, said UB Pravin Rao, COO.
However, its FY17 standalone attrition rate increased to 15 percent from 13.6 percent and consolidated attrition rate jumped to 19.2 percent from 18.7 percent in previous financial year.
The software services exporter said its revenue from North America business grew by 1.3 percent QoQ & 1.2 percent in constant currency while Europe business was flat during the quarter QoQ & down 1.6 percent in constant currency.
Revenue from its India business also fell 5.4 percent QoQ and 6.9 percent in constant currency. Rest of the World revenue increased 0.8 percent quarter-on-quarter but fell 1.3 percent in constant currency.
Financial services & insurance business grew by 0.5 percent in constant currency while energy, communication & services segment showed 2.8 percent growth in the quarter gone by. Manufacturing & Hi-tech business was flat in constant currency but revenue from retail, CPG & logistics segment declined 3.1 percent in constant currency.
Infosys' board has appointed Ravi Venkatesan, independent director as its co-chairman. He has been on the board since April, 2011.
At 10:31 hours IST, the stock was quoting at Rs 948.25, down Rs 20.55, or 2.12 percent amid high volumes on the BSE.Posted by Sunil Shankar Matkar