See caution in some segments but pipeline for large deals remains strong: Infosys CEO Salil Parekh

Infosys Chief Executive Officer (CEO) Salil Parekh sounded some caution on the demand environment while announcing results for the September quarter but said that the pipeline for large deals remains strong.

“We also see that there is some caution. Last time, we saw some caution in mortgages, in financial services, in retail. We now see some caution in hitech and telecom,” Parekh said.

Infosys booked $2.7 billion in large deals in the quarter, up from last quarter’s $1.7 billion. “Our pipeline for large deals remains quite strong today and it's in a good position,” he said.

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The firm narrowed its revenue forecast to 15-16 percent from 14-16 percent earlier.

Parekh added that there is more interest in automation and cost efficiency, which the company sees coming through in its pipeline.

Over queries of a slowdown due to macroeconomic conditions in the US and Europe — two of the company’s biggest markets — the CEO said they continue to see the pipeline in both these geographies but are also being watchful.

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Among markets, North America accounted for 62.5 percent share of the revenue, and Europe 24.7 percent.

In terms of revenues, financial services made up the largest part of the pie with 30.5 percent, followed by retail at 14.2 percent and communication at 12.3 percent.

Parekh added that large deals are volatile and the numbers vary across quarters. “These are not very predictable but in general if you look over a four-quarter period, we have a fairly good large quarter momentum,” he said.

He said that many large companies are also looking at being more cost-efficient.

“On cost optimisation, we see good discussions of that with our clients. In some industries, we see more of that. In others, at a moderate level. So that's where we are seeing good traction which is also showing up in the growth of core services,” Parekh told analysts after the earnings.

Commenting on the change in pricing environment, Chief Financial Officer Nilanjan Roy said that Infosys has seen a reduction in discounts, where the kind of discounts provided on renewal, etc have come down.

"The macro environment has some areas which we are looking at with more caution, but our overall demand and the large deal pipeline is strong and both engines are doing well -- digital core and automation," he added.

In a note, ICICI Securities said that pain due to macro headwinds is evident in the sector. It believes Infosys will benefit from cost-takeout deals, is likely to deliver industry-leading growth, and that its margins have bottomed out and will likely improve from here on.

The consolidated net profit for the quarter came in at Rs 6,021 cr0re, up 11.1 percent year on year, and 12.3 percent sequentially.

Revenues grew 23.4 percent year on year, and six percent sequentially.

The board also approved a share buyback of Rs 9,300 crore through the open market route.