Infosys’ revenue, profit and margin in the red as Coronavirus sweeps over the global economy

• The IT services major declared a dividend of ₹9.5 a share.
• The number of $10 million-plus clients went up by 2 and the number of million-dollar clients rose by 13.
• The company has suspended guidance for the coming quarter.

Indian IT services major Infosys saw a dip in its revenue growth by 0.8% in constant currency terms in the latest fourth quarter.

For the full year, net profit up 8% at ₹16,639 crore; revenue rises 9.8% to ₹90,791 crore. However, quarter-on-quarter net profits fell by 2.9% and margins dipped by 0.7%

Infosys shares jumped by nearly 5% ahead of its earnings announcement today. The Board recommended a final dividend of ₹9.50 per equity share for the financial year ended March 31, 2020.

The number of $10 million-plus clients went up by 2 and the number of million-dollar clients rose by 13. The company signed $9 billion worth of large deals in the last 12 months. “We don’t know if this crisis will last a couple of quarters or more,” CEO Salil Parekh said. But he struck a confident note while adding that the crisis will push more clients to look for the adoption of technology to reduce costs and for digital transformation.

Digital business was 42% of the total revenue at the end of March 2020. “Manufacturing sectors have been impacted in a big way, media and entertainment will also struggle. There may be a delay in 5G rollout,” Chief Operating Officer Pravin Rao said.

A weaker rupee added 2% to the profit margin, revealed Chief Financial Officer Nilanjan Roy. The Indian currency has weakened further since and it is good for the company, which earns more than 90% of its revenue in foreign currencies like dollars and euros.

“We have provided all the information that SEBI has requested. There is nothing else we need to provide at this stage to SEBI,” Parekh said addressing a question on the probe into the whistleblower allegations.

Infosys employees working from home
Around 93% of the Infosys’ employees at working from home. In view of the Coronavirus pandemic, the company has decided to not give out any promotions or increments this year. It also clarified that it won’t be firing anyone or ask anyone take furlough.

Before Infosys, its competitors Tata Consultancy Services (TCS) and Wipro have already indicated big changes in the works due to the impact of COVID-19. While Wipro hasn’t ruled out lay-offs or furloughs, TCS plans to honour its offers to freshers and shift to the 25/25 operating model.

The 25/25 model basically is an indication that work from home is here to stay with the company planning to reduce the in-office time of its employees to 25% by 2025.

It’s going to get worse before it gets better
Like Wipro, Infosys suspended giving a guidance for the coming quarter. TCS, who normally does not issue guidance, was upfront about the fact that the next two quarters are probably going to see a downturn before things pick up in the third and fourth quarters of 2021 to level at par with the respective quarters in 2020.

See also:
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