Infosys reported a soft 3.1% on-year growth in net profit in the fiscal first quarter, to touch Rs 5,362 crore, missing Dalal Street expectations. Although the company reported growth in profits when compared to the previous year, sequentially, profits were lower. The consolidated revenue in constant currency terms of the Information Technology behemoth soared 23.6% from the same period last year to Rs 34,470 crore. Infosys was expected to post an 8-10% growth in net profit in the April-June quarter of the current financial year. The Infosys stock had closed down 1.73% at 1,506 per share on Friday.
The operating margin of the company stood at 20.1%, a decline of 3.6% on year and a decline of 1.4% on-quarter basis. Infosys added 106 clients during the quarter in review while total employees increased to 3.35 lakh from 3.14 lakh last quarter. “We are investing in rapid talent expansion while ensuring rewarding careers for our employees, to better serve evolving market opportunities,” said Salil Parekh, CEO and MD of Infosys. “This has resulted in a strong performance in Q1 and increase in FY23 revenue guidance to 14%-16%”, he added. Margin guidance has been retained at 21%-23%.
Infosys segment of Infosys’ business saw 32.8% growth to $2,710 million while core segment revenue was up $1,734 crore. Digital revenue as a percentage of total revenue stood at 61%. Financial services continued to remain the firm’s largest business segment, contributing 30.6% followed by retail and communication at 14.5% and 13%, respectively.
The IT major was expected to post strong numbers in the April-June quarter with analysts at Motilal Oswal projecting a net profit of Rs 5,710 crore, up 9.8% on-year. ICICI Direct had expected net profit growth of 8.5% to Rs 5,638 crore.
“We are fueling the strong growth momentum with strategic investments in talent through hiring and competitive compensation revisions. While this will impact margins in the immediate term, it is expected to reduce attrition levels and position us well for future growth. We continue to optimize various cost levers to drive efficiency in operations”, said Nilanjan Roy, Chief Financial Officer, Infosys. Voluntary attrition in the April-June quarter stood at 28.4% up from 27.7% last quarter and 13.9% a year ago.
“Infosys reported a subdued 1QFY23 performance. Margins were below our expectations. However, management raised its FY23 revenue growth guidance from 13-15% to now 14-16% and maintain its EBIT margin guidance at 21-23%, indicating better performance during balance of 9M of FY23,” said Mitul Shah – Head of Research at Reliance Securities. “Considering the industry-leading double-digit revenue growth, rising share of digital business (61% of revenue), likely improvement in EBIT margin levels from current levels and valuation comfort post stock price correction, we have a BUY recommendation at present,” Mitul Shaha added.