Infosys to be impacted by salary hikes, furloughs, fewer working days in H2FY25

Infosys Ltd

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Salary hikes, furloughs, and fewer working days in the coming months will impact the performance of Infosys in the second half of FY25 (H1FY25). The Bengaluru-based company said these impacts have been factored into the guidance for the remainder of the year.

Furloughs involve the situation where clients in areas like the US and Europe refrain from compensating outsourced employees from Indian IT firms for specific days when their operations are suspended, typically during Christmas and New Year.

"The headwinds will come from compensation increase in Q4. Q3 and Q4 will have regular seasonality in terms of furloughs, in terms of lower working days," Jayesh Sanghrajka, Chief Financial Officer of Infosys said in the post-earnings conference call of Q2 FY25.

Infosys, in its results announcement, raised its FY25 revenue guidance to 3.75-4.5 percent in constant currency terms, up from the 3-4 percent band given by the company in the previous quarter. The company's operating margin guidance for FY25 was constant at 20-22 percent.

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"There are various factors that have led to a guidance change, starting from the Q2 performance, the increase in volumes that we saw across multiple sectors, including financial services," Sanghrajka said. "We have baked in the regular furloughs (in the guidance) that we have seen over the past few years," he added.

The company also said, that while it has not spelt out the quantum of the wage hike, it is going to be in two phases. "The junior employees will get it in January and the rest will get it in April," he said.

The company expects a majority of its employees to receive hikes in January, which implies that the fourth-quarter margins will be impacted.

When asked about tailwinds that might aid margins, he said Project Maximus, pricing, and role ratios optimisation will help in the last two quarters.

So all of those would be part of the same bucket of Project Maximus.

On October 17, Infosys shares closed almost 3 percent higher at Rs 1,974.55.

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