BENGALURU: India’s second-largest IT services provider, Infosys announced its Q3 FY20 results on Friday, registering a consolidated net profit of Rs 4,466 crore, up by 23.7 per cent YoY from Rs 3,610 crore in the same quarter last year, beating a majority of estimates by stock brokerage firms.
The net profit rose by 10.6 per cent this quarter from Rs 4,037 crore in Q2 FY20. Despite the IT behemoth running under rough weather due to whistleblower allegations, top financial analysts have maintained a positive outlook for the Bengaluru-based firm in FY20 and FY21.
The revenues grew to Rs 23,092 crore in Q2 FY20, a 7.9 per cent YoY and 2 per cent QoQ increase. Infosys has also increased its FY20 revenue guidance to 10-10.5 per cent from 9-10 per cent in constant currency terms. Digital sales continued to be the driving force accounting for 40.6 per cent of the total revenue and stood at $1,318 million, registering a 40.8 per cent growth YoY and 6.8 per cent increase QoQ.
“Q3 results further underscore that we remain steadfast in our journey of sustained client relevance and deepening engagement with them, as they partner with us in navigating their next in the digital transformation era. For us, this has translated into double-digit growth year-to-date, leading to an increase in revenue guidance, accompanied by expanding operating margins,” said Salil Parekh, CEO and MD, Infosys.
The banking, financial services and insurance (BFSI) sector, which contribute to 31.5 per cent of the total revenues at Infy recorded a 6.2 per cent YoY growth in constant currency terms. The communications and life science business segments grew substantially by 20.6 per cent and 17.7 per cent YoY.
North America, which has 61.3 per cent base of client base reported revenue growth of 10.1 per cent YoY. In terms of geography, Europe and India saw the largest revenue growth at 12 per cent and 18 per cent YoY respectively. The number of clients increased from 1,364 in Q2 FY20 to 1,384 in Q3 FY20. The headcount in December, FY20 stood at 2,43,454 from 2,36,486.
Analysts said that the large deal wins, digital sales growth and emphasis on local hiring overseas has led to an increased revenue generation for the IT firm and the outlook remains fairly positive. “Infosys reported a below than expected operational performance in Q3 FY20. Below than expected revenue was on account of 2.8 per cent sequential dip in run the business revenues (which we believe is impacted due to furloughs).
While strong large deal wins (up 14.6 per cent YoY to $1.8 billion) and robust growth in digital revenues (up 39.9 per cent YoY and 7.2 per cent QoQ) were positive.
Infosys has raised its constant currency revenue growth guidance to 10-10.5 per cent (from 9-10 per cent) for FY20E, while maintained operating margin guidance of 21-23 per cent. Healthy deal wins, digital growth story and upward revision in guidance augurs well. Hence, we remain positive for the firm,” ICICI securities told this publication.
Shailesh Shah, founder, Strta Consulting Services said, “We remain positive on the IT sector overall because the slowdown hasn’t impacted IT services sector. The QoQ growth is good, profitability is also stable. The Q3 results also go on to prove that the whistleblower allegations had no impact...”
Infosys audit panel finds no evidence of financial impropriety
The audit committee appointed by the Infosys Board of Directors said on Friday that its investigation into the whistleblower allegations that were disclosed in October last year accusing CEO Salil Parekh and CFO Nilanjan Roy of financial malpractices are substantially without merit. The panel conducted a thorough investigation into the matter.
“The audit committee took the anonymous whistleblower complaints very seriously and commissioned a thorough investigation with the assistance of independent legal counsel. The audit committee determined that there was no evidence of any financial impropriety or executive misconduct,” said D Sundaram, chairperson, Audit Committee, Infosys.