CEO Vishal Sikka-led Infosys shares fell as much as 6 pct on Thursday in the wake of the IT behemoth unveiling its 4th quarterly results today, and are heading towards steepest daily fall since May 2014 – net profit was Rs 3,097 crore for the quarter ended March 31, 2015.
BSE Sensex plunged 297.08 pts to close at 27,437.94; Nifty 93.05 pts to 8,305.25.
Infosys Ltd, India’s second-largest software services exporter, said it expects revenue in this financial year to rise as much as 12 percent, after posting fourth-quarter profit that slightly missed analyst estimates.
Infosys also said it agreed to buy Kallidus Inc and an affiliate, which provide digital services such as mobile commerce for retail clients, for $120 million.
“We see the industry going through a fundamental and structural transition. Despite being a challenging quarter, I am encouraged by the early successes in executing our Renew – New strategy, on a foundation of learning”, said CEO & MD Dr Vishal Sikka.
“Our focused employee engagement initiatives over the last few months have resulted in containing employee attrition to one of the lowest in recent times. And our investments in innovation and in renewing our capabilities are helping to elevate our client relationships. ”
Check out the Highlights: Read Full Stat Report
* FY 16 revenues expected to grow between 10%-12% in constant currency terms
* Dividend pay-out ratio increased to up to 50% of post – tax profits effective FY 15
* 1:1 bonus issue of equity shares and 1:1 stock dividend of American Depositary Shares
* FY 15 EPS grew by 15.8% year on year
* Operating margins expanded by 190 bps in FY 15 to 25.9%
* Quarterly annualized attrition for Infosys Limited declined to 13.4% in Q4 compared to 23.4% in Q1
* Announces definitive agreement to acquire Kallidus Inc. (d.b.a Skava) and invest in Airviz
* Infosys Q4 profit up 3.5 pct; lags estimates.
* Jan-March U.S. dollar revenue growth lags estimates, say analysts.
* Adjusting for Kallidus and Panaya acquisitions, guided growth below street consensus expectation, say analysts.
Consolidated results under International Financial Reporting Standards (IFRS) for the year and quarter ended March 31, 2015
Year ended March 31, 2015
* Revenues were Rs 53,319 crore for the year ended March 31, 2015
YoY growth was 6.4%
* Net profit was Rs 12,329 crore for the year ended March 31, 2015
YoY growth was 15.8%
* Earnings per share (EPS) was Rs 107.88 for the year ended March 31, 2015
YoY growth was 15.8%
Quarter ended March 31, 2015
* Revenues were Rs 13,411 crore for the quarter ended March 31, 2015
YoY growth was 4.2%, QoQ growth was (2.8%)
* Net profit was Rs 3,097 crore for the quarter ended March 31, 2015
YoY growth was 3.5%, QoQ growth was (4.7%)
* Earnings per share (EPS) was Rs 27.10 for the quarter ended March 31, 2015
YoY growth was 3.5%, QoQ growth was (4.7%)
* Liquid assets including cash and cash equivalents, available-for-sale financial assets, certificates of deposits and government bonds were Rs 32,585 crore as on March 31, 2015 as compared to Rs 34,873 crore as on December 31, 2014 and Rs 30,251 crore as on March 31, 2014
* The Board in its meeting held on April 24, 2015 has considered, approved and recommended a bonus issue of one equity share for every equity share held and a stock dividend of one American Depositary Share (ADS) for every ADS held, as on a record date to be determined
* The company’s current policy is to pay dividends of up to 40% of post – tax profits. The Board has decided to increase the dividend pay – out ratio to up to 50% of post – tax profits effective fiscal 2015
* The Board of Directors recommended a final dividend of Rs 29.50 per share for fiscal 2015 (equivalent to Rs 14.75 per share after 1:1 bonus issue, if approved by shareholders)
* Infosys spent Rs 254 crore in FY 15, towards Corporate Social Responsibility (CSR) which is primarily being carried out through the Infosys Foundation, its philanthropic arm. The Infosys Foundation is engaged in several programs aimed at alleviating hunger, promoting education, computing literacy, improving health, assisting rural development, supporting arts and helping the destitute
* Gross employee additions over 50,000 for the year
* Utilization (excluding trainees) expands 450 bps for the year
* Quarterly annualized attrition declines to 13.4% for Infosys Limited in Q4
The Company’s outlook (consolidated) for the fiscal year ending March 31, 2016, under IFRS is as follows:
Revenues are expected to grow 10% – 12% in constant currency terms;
Revenues are expected to grow 8.4% – 10.4% in INR terms
*Conversion: 1 US$ = Rs 62.50 for the fiscal 2016
“Services growth in the fourth quarter was lower than we expected, though we saw healthy growth in Finacle and our Edge suite. Pricing continues to be under pressure due to increasing commoditization in the traditional outsourcing business, requiring us to ramp up productivity through automation, and enhance our differentiation in large engagements”, said U.B. Pravin Rao, COO “But we are well placed to pursue healthy overall growth in the new fiscal year.”
Bangalore-based Infosys, once seen as the bellwether of India’s about $150 billion IT services industry, has in recent years struggled to innovate and retain market share due to a staff exodus that impacted its ability to win lucrative deals.
Under Chief Executive Vishal Sikka, the company has been making big bets on automation and other new technology like artificial intelligence and cloud-based services to regain some lost ground from rivals.
For the year ending March 2016, Infosys said it expects revenue growth of 10 percent to 12 percent. Revenue grew 6.4 percent in the last fiscal year to 533.19 billion rupees ($8.39 billion).
“We were able to improve profitability during the year even as we made in vestments into our employees and other strategic areas. We have been able to achieve this because of increased operating efficiencies despite a difficult pricing environment”, said Rajiv Bansal, CFO.
“Consistent with our objective of increasing shareholder returns, the Board has approved an increase in the dividend pay
– out ratio to 50% of post – tax profits. The Board has also recommended a 1:1 bonus issue of equity shares and 1:1 stock dividend of American Depositary Shares.
Pricing continues to be under pressure due to increasing commoditization in the traditional outsourcing business, requiring the company to ramp up productivity through automation, Chief Operating Officer U.B. Pravin Rao said in a statement.
Infosys, which provides IT services to clients like Apple Inc, Volkswagen AG and Wal-Mart Stores Inc , also said fourth-quarter net profit reached 30.97 billion rupees, from 29.92 billion rupees a year earlier.
Analysts, on average, were expecting it to make 31.86 billion rupees, according to Thomson Reuters data.
Revenue, two-thirds of which comes from clients in the United States and Europe, rose 4.2 percent in the quarter to 134.11 billion rupees, as the company added 52 new clients.
Shares of Infosys fell more than 5 percent after the earnings release.
Last week, bigger rival Tata Consultancy Services Ltd posted weak revenue numbers, worrying money managers that the slowdown seen by India’s largest software services exporter could be an indicator of an industry-wide trend.
Researcher Gartner earlier this month said worldwide IT spending was set to fall 1.3 percent from last year to $3.66 trillion in 2015, blaming the slowdown mainly on the rising U.S. dollar.
($1 = 63.5250 Indian rupees)
Infosys is expected to see a 60-70-basis-point (bps) decline in its operating profit margin as it closes the fourth quarter of FY15 hit by cross-currency movements. At the same time, speculation is mounting that the IT major is close to announcing another acquisition in the digital domain.
Infosys, which will announce its results on Friday in Chennai, is not expected to buck the trend, as witnessed in the quarterly performances of TCS and Wipro, which recorded flattish revenue growth and tepid profits.
Brokerage house Kotak Institutional Equities in its report on Infosys said, “We estimate sequential constant currency revenue growth of 2% and flat revenues in US dollar terms. EBIT margins are likely to decline due to absence of provision write-back (30 bps) that aided margins in 3QFY15 and cross-currency headwinds. We forecast 60-bps qoq decline.”
Infosys reported an operating profit margin of 26.7% at the end of third quarter of FY15, which was a sequential increase of 60 bps. BNP Paribas said, “We expect a 70 bps quarter-on-quarter margin decline, i.e., expect the EBIT margin to fall back to the 24-26% guided range.”
On the possible second acquisition by Infosys under Sikka, it is understood that the company may fork out $100-150 million for this small technology company with presence in the digital domain. The name and geographic location of this firm could not be ascertained but it is estimated to have revenues of around $30 million.
Another aspect to watch out for is its revenue growth guidance for FY16. The IT major has guided for revenue growth in the range of 7-9% in dollar terms for FY15 and brokerages estimate that it is unlikely to overshoot this target.
Goldman Sachs in its report said, “On FY16 revenue growth guidance, we expect them to guide for 8-10% US dollars revenue growth, tad lower than street estimates for FY16 growth.”