Infosys guidance for FY21 estimates 0-2% revenue growth: Key takeaways

Mumbai: IT major Infosys on Wednesday beat Street view as it posted a 11.5 per cent year-on-year (YoY) growth in Q1FY21, in the quarter marked by Covid-19 pandemic, and projected FY21 revenue growth guidance in the range of 0-2 per cent in constant currency terms. This was contrary to the expectations that the company may refrain from providing any guidance.

The country’s second-largest IT company reported a net profit of Rs 4,233 crore for the quarter ended June, compared with Rs 3,798 crore in the corresponding quarter last year. Analysts in an ET NOW poll had projected the figure at Rs 3,820 crore.

Its consolidated revenue increased 8.5 per cent year-on-year (YoY) to Rs 23,665 crore in Q1FY21, over Rs 21,803 crore in the same period last year. Analysts had projected the figure at Rs 22,600 crore.


“Our Q1 results, especially growth, are a clear testimony to the relevance of our service offerings and deep understanding of clients’ business priorities which is resonating with them in these times,” said CEO and MD Salil Parekh.

“Our confidence and visibility for the rest of the year is improving driven by our Q1 performance and large deal wins,” he added.

Ahead of its earnings announcement, Infosys shares rose 6.16 per cent to Rs 831.45, and were the biggest contributor to Sensex’s gains, while the benchmark rose 0.05 per cent to close at 36,051.81 points.

Here are the key takeaways from Infosys’ Q1 earnings announcement:
Guidance: The company provided FY 21 revenue growth guidance in the range of 0 per cent-2 per cent in constant currency terms in the backdrop of ongoing Covid-19 crisis, and operating margin for FY 21 in the range of 21 per cent-23 per cent. Analysts had expected that the company may refrain from providing guidance in the wake of Covid-19 uncertainty.

Margin expansion: Infosys’ operating margin came in at 22.7 per cent, increase of 220 basis points year-on-year. The free cash flow was at Rs 5,524 crore, registering a YoY growth of 63.5 per cent

Management commentary: Operating margin expanded to 22.7 per cent driven by preemptive deployment of our strategic cost levers along with tactical opportunities triggered by the COVID situation,” said CFO Nilanjan Roy, CFO. “Collections were robust and capex was focused, which led to 50 per cent year on year increase in free cash flows. Our liquid and debt free Balance Sheet is a huge source of strength in these times,” he added.

Deal wins: The company announced large deal wins worth $1.74 billion during the quarter.

Digital revenues rise: Digital revenues at $1,389 million (44.5 per cent of total revenues), year-on-year growth of 25.5 per cent in constant currency.

Voluntary attrition drops: Voluntary attrition for IT services declined to 11.7 per cent from 20.2 per cent in Q1 20.

Board changes: Infosys appointed Bobby Parikh as an additional and Independent director of the company for a period of 3 years, subject to the approval of the shareholders.