Infosys set to return to double-digit revenue growth in FY 21-22

On the back of unprecedented deal wins worth $7.13 billion in the December quarter, technology services major, Infosys is set to return to double-digit revenue growth in the new fiscal.

Infosys saw its revenues grow by 6.2 per cent sequentially in dollar terms and 5.3 per cent in constant currency, its best in eight years.

Digital services now account for 50.1 per cent of revenues, suggesting that the company’s transformation is on course. On the back of such a strong performance in a seasonally weak quarter, the company revised its revenue and margin guidance band for FY21 upwards to 4.5-5.0 per cent and 24-24.5 per cent respectively.

The company’s net profit during the quarter jumped 7.3 per cent sequentially and 16.6 per cent year-on-year to Rs 5,197 crore against Bloomberg’s estimates of Rs 5,057.20. Sequentially, operating margins expanded by 10 basis points to 25.4 per cent but y-o-y, they jumped 350 bps. Free cash flows in Q3 came in at `5,683 crore with a y-o-y growth of 19.4% with the cash conversion rate at 109 per cent of the net profit.

Even though Infosys plans to roll out wage hikes in the March quarter, it is not expecting a major hit to its margins as it remains focused on strategic measures and cost optimisation programme. Work from home will continue to yield some gains too. Currently, 97 per cent of Infosys’ global workforce is working from home.

The pandemic has only accelerated digital spends by clients and Infosys is leveraging the capabilities it has built over the last few years to wrest market share from peers. Infosys CEO Salil Parekh said that there was a move to accelerate digital spends and clients were moving to the cloud which helped the company increase its market share.

Infosys announced deals with Vanguard and Daimler. The deal with Daimler AG is a long-term strategic one to transform its IT infrastructure. The growth has been broad-based with revenues from the BFSI, high tech and life sciences verticals growing in double digits y-o-y.

On the deal wins, Parekh said, “We have had an exceptionally strong quarter across multiple dimensions. We achieved our highest deal wins in our history, with a deal value of $7.1 billion, which includes the largest deal we signed in our history and, what we believe, is the largest deal in the history of India’s IT services industry. Our overall deal value for the nine months of the financial year is over $12 billion and our net new large deals is over $8 billion, positioning us very well for the quarters ahead.”

The quarter also saw utilisation (excluding trainees) touching its highest ever at 86.3 per cent from 83.6 per cent in the September quarter. Voluntary attrition in Q3 also inched up to 10 per cent from 7.8 per cent in Q2 and 15.8 per cent last year. The management expects the attrition to inch up further from the current levels in the coming quarters.