Will lead industry growth, meet FY16 guidance: Infosys

Infosys is confident of meeting its guidance of 10-12 percent growth for fiscal 2016. Basking in the aftermath of a fantastic quarterly performance, Infosys CEO Vishal Sikka and CFO Rajiv Bansal spoke to CNBC-TV18 to explain the success story. Q: Great quarter, but as you said, it is not a turn-around quarter as such and let us not focus on one quarter but, can we at least say that going ahead, you will be keep pace with the kind of performance seen this quarter? Also your guidance as 10-12 percent is definitely significant. If you keep up, will you be able to beat that? Sikka: We are confident in our guidance that we have given and we are really proud of the quarter and the consolation of events that converged over growth of the quarter to get there. Quarters are volatile animals and you never know how these 90-days cycle turns out. However, we are confident that we will get to 10-12 percent constant currency growth for the year. The initiatives that we have put in these are the ground swell kind of initiatives and they are starting to show early results, both in terms of large deal wins and also in the success that we have had with our large clients. We did more than five-and-half percent growth in our top ten clients. So, these are things that we have and very determined and dedicated focus have started to show results. But otherwise, what Rajiv and I are saying is that for now we feel confident that our guidance is 10-12 percent. Q: But, would you be able to meet the industry leading target of FY17 all year in FY16? Sikka: We are still holding on to what we had said that middle of next year is our target to get to industry leading growth and we feel good about that. Q: Break up margins quickly and going ahead there is a lot of volatility in terms of currency, in terms of macro uncertainty, like Europe. What are the areas that you will watch out for in the next three quarters to be able to sustain margins and volumes at 5.4 percent? Bansal: On the margin front, we gave out a wage hike to all our employees — in India about 6.5-7 and in overseas about 2 percent. So the impact was about 200 basis points on margins. The visa application which goes for the US visas was about 60 basis points. So, overall the impact was about 260 basis points. The rupee depreciation during the quarter was about 2.5 percent which gives us a benefit of about 60 basis points. And all the other operational efficiency that we saw in the system, like cost optimisation gave us a benefit of 30 basis points. So, that is all. The margins pans out to be a 170 basis point drop in operating margins. on the volume growth, the volume growth has been the best in the last 19 quarters, which actually gives us a lot of confidence in terms of what we are seeing in the subsequent quarters. But you have understand, volume growth and utilisation and pricing are all related to each other. All three of them have to look good to sustain on the margins. So, the volume growth is very good, but the utilisation is good but the pricing falls then it is a matter of concern. So, as we look at the margin front, we have to be focused on making investment in the business. The business requires investments, we are changing the course of the business, we are investing in new technologies, we are investing in new areas of business. So, we cannot expect to accelerate our growth but cut down investments. We have to balance it. And that is a tough job, it is not easy. So, what we are saying is, we have given a margin band, we are not sticking to one margin number, we have given a margin of 24-26 percent. We feel confident that we will be within that band and at the same time we will be able to make money while making investments. Q: Quickly rate Vishal on the one year anniversary. Bansal: The best, and I enjoy and not at all sincere.