Infosys Ltd’s consolidated net profit for the third quarter of the current financial year 2016-17 rose 2.3% on-quarter to Rs 37.08 billion, beating most analyst estimates and sending shares soaring.India’s second largest information technology services company’s consolidated revenue for the Oct-Dec quarter was almost flat at Rs 172.73 billion, down 0.2% from the previous quarter.
However, despite the strong showing of the third quarter financial results, the company lowered its full fiscal 2016-17 USD revenue growth guidance to 7.2-7.6% from 8.6-9%. It narrowed the band for the full year constant currency revenue growth guidance to 8.4-8.8% from 8-9% earlier.
“Taking into account seasonal and other additional headwinds for the quarter, our Q3 revenue performance was broadly in line with our expectations,” Infosys CEO and MD Vishal Sikka said. He added that the company did well in the third quarter despite facing traditional headwinds from less number of working days in the quarter and from the one-time impact of RBS. In a big blow to Infosys, the Royal Bank of Scotland (RBS) had earlier last year cancelled a major five-year $300-million-pound contract potentially impacting as many as 3,000 of Infosys employees and revenues for the year by about $40 million.
Good operating margin show
The company’s operating margin for the quarter at 25.09% rose by 0.2% from the previous quarter, but trailed its rival Tata Consultancy Services, which yesterday reported its operating margin at 26%. Further, the company maintained its nine-month (YTD) operating margin at 24.7%, about the same as the corresponding period last year. “Our ongoing focus on operational efficiencies has enabled us to keep YTD operating margins at similar levels for the same period last year,” CFO M D Ranganath said, adding, “Our cash generation during the quarter was strong.”
Infosys further said that it has maintained the YTD margin at 24.7% despite a 1.7% fall in constant currency pricing, due to increasing efficiencies.
Consolidated operating profit (EBIT) was at Rs 43.34 billion. The company’s LTM (last twelve month) revenue also crossed the $10-billion mark.
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During the third quarter, Infosys added 77 clients. It added two clients in the $75 million band.
The company reported utilisation at its highest ever at 81.9% in the quarter. “In a seasonally soft quarter, our utilisation has remained healthy,” Infosys COO U B Pravin Rao said.
Attrition in the quarter declined sequentially by 0.8% on standalone basis and 1.6% on consolidated basis. “Our continued efforts to improve employee engagement and experience resulted in a reduction in attrition,” he added.
EPS in the Q3 grew 2.8% sequentially and 7.0% on year-on-year basis. During the quarter, the company paid interim dividend including tax of Rs 30.29 billion. It had liquid assets including cash and cash equivalents and investments at Rs 356.97 billion as on December 31, 2016 as compared to Rs 356.40 billion as on September 30, 2016.
Infosys Ltd’s shares pared early morning gains on profit booking, falling 2% from the previous close to Rs 979.