Infosys sees 4-7% revenue growth in FY24 after it misses its FY23 guidance

• IT major Infosys missed its own revenue guidance for the full year FY23, reporting a growth of 15.4% in constant currency terms.
• It also guided for a notably lower revenue growth in FY24, at a mere 4-7%.
• Infosys CEO and MD Salil Parekh cited “uncertain environment” and “unplanned” project ramp downs in some of the company’s clients during the March quarter as reasons for the low guidance.

IT major Infosys guided for a 4-7% revenue growth in FY24, after missing its own revenue guidance for the full year FY23. This is the first time since FY16 that Infosys has guided for single-digit revenue growth in constant currency terms. Chief executive officer and managing director Salil Parekh cited an “uncertain environment” for the low guidance.

For FY23, the Bengaluru-based company reported a growth of 15.4% in constant currency terms, lower than the guidance of 16-16.5% that it had given at the end of Q3. For the fourth quarter, the Indian IT major reported a revenue degrowth of 2.2% sequentially in dollar terms, and a 3.2% decline in constant currency terms.

“During the quarter, we saw unplanned project ramp downs in some of our clients, and delays in decision-making, which resulted in lower volumes. In addition, we had some one-time revenue impact,” said Parekh in a post-earnings press conference.

The one-time revenue impact was due to a combination of cancellations and some client-specific issues, said chief financial officer Nilanjan Roy on an earnings call.

The company also guided for an operating margin of 20-22% for FY24. Operating margin for FY23 stood at 21% in dollar terms, while the digital business grew at 25.6% in constant currency terms.

For the March quarter, its revenue grew 16% YoY to ₹37,441 crore in rupee terms, while net profit increased by 7.8% to ₹6,128 crore.

“While we saw some stabilisation in March, the environment remains uncertain,” Parekh said.

Infosys declared a final dividend of ₹17.5 per share, with the record date being June 2, 2023.

Infosys’ FY23 at a glance:

Source: Company reports / Rupee terms

‘Unplanned ramp downs’ behind revenue miss

Explaining why the company missed its own revenue guidance, CEO Parekh said that it was due to “ramp downs which were unplanned”.

“This was across sectors. We saw some in telecom, some in high-tech, some in retail. Within financial services, [it was] mortgages, asset management and investment banking,” Parekh added.

Geographically, Europe outpaced North America by a wide margin, with constant currency revenue growing at 20.3% in Europe as compared to 6% in North America. North America’s share in Infosys’ total revenue also dipped from 62% at the end of Q3 to 61% at the end of Q4, while Europe’s share increased from 25.8% to 27%.

Large deal pipeline ‘extremely strong’

During the March quarter, Infosys bagged $2.1 billion worth large deals, lower than the $3.3 billion wins in the previous quarter. For the full year FY23, Infosys’ total deal wins stood at $9.8 billion.

Infosys reported a net addition of 22 clients during the March quarter. Nearly half of these additions were in the smallest category of over $1 million, while four additions were in the over $10 million category.

“As the environment has changed, we see strong interest from our clients for efficiency, cost and consolidation opportunities, resulting in a strong large deal pipeline,” Parekh said in a post-earnings press conference.

Its client base in the over $50 million category reduced by 4, while it added two clients in the over $100 million category.

“Our pipeline of large deals is extremely strong. Several of these are mega deals, and several of them are opportunities for cost and efficiency programmes within clients and consolidation opportunities,” Parekh said.


Source: Company reports

Attrition rate continues to cool down

Elevated attrition rates which have been plaguing Infosys and its peers over the last two years are now cooling down. The company reported a sharp decline in attrition rate to 20.9% from 24.3% at the end of Q3.

Its headcount declined by 3,611 to 3,43,234 employees at the end of March from 3,46,845 employees at the end of Q3.

On the other hand, its peer TCS reported an increase in its total headcount by 821 employees.

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