Infosys suspends FY21 guidance citing uncertainty; reports Rs 4,335-crore profit in Q4

Published: April 21, 2020 2:45 AM

Digital revenues now account for 42% of the overall revenues. Growth across business segments and geographies remained flat during the quarter ended March 31.

The company has successfully facilitated 93% of its workforce to work from home.The company has successfully facilitated 93% of its workforce to work from home.

By Srinath Srinivasan

In line with its peers, Infosys on Monday refrained from giving a guidance on revenues and margins for the new fiscal. It anticipates near-term challenges in its business as a wide set of industries have been disrupted by the coronavirus pandemic.

Infosys CEO Salil Parekh said, “Given the uncertain environment with the global pandemic, we do not feel it will be appropriate to provide an annual guidance at this stage. As a result, we are suspending the practice of giving revenue growth and margin guidance for FY21.”

The company has successfully facilitated 93% of its workforce to work from home.

While Infosys did not give any details on how much of an impact the COVID-19 crisis would have on its revenues in the new fiscal, Parekh does expect margins to come under pressure. “There will be near-term margin pressure. We have a cash reserve of $3.6 billion and we have no debt. With this, we are positioned to take on the crisis effectively.”

Despite its strong balance sheet, the company is taking several measures to cut costs. “We will be delaying onboarding new hires, temporarily freezing hiring, hikes and promotion. We have no regrets in doing so. It will help us come out of the crisis stronger,” Infosys CFO Nilanjan Roy said, adding that all commitments made on hiring will be honoured.

The company also said some of its clients had asked for deferrals on payment and it would take these up on a case-to-case basis. The company said it had brought down its day sales outstanding (DSO) in the March quarter itself and with sufficient cash on the balance sheet, it was not worried. “A few of the clients have asked for payment extension. They are in retail and as such we can’t say how it will affect our Q1FY21 numbers. We are in the initial stages of the conversation,” Roy added.

On the business front, the company is seeing increased interest from clients in the area of cloud, virtualisation, cost reduction programmes and workforce transformation. However, Infosys does not see a quick recovery for a couple of quarters. “No recovery in sight for at least 2-3 quarters. BFSI, aviation, media and entertainment and manufacturing will face challenges. 5G rollout and applications will be delayed. This is going to be true across geographies,” chief operating officer Pravin Rao said.

The impact of the COVID-19 crisis is visible in the company’s fourth-quarter numbers. In dollar terms, the company’s revenues fell 1.4% sequentially to $3.19 billion, while in constant currency, revenues fell by 0.8% sequentially. For the March quarter, Infosys posted a revenue of Rs 23,267 crore and a net profit of Rs 4,335 crore with an operating margin of 21.2% — a 70 bps decline sequentially. Digital revenues now account for 42% of the overall revenues. Growth across business segments and geographies remained flat during the quarter ended March 31. However, the landscape is set to change with the crisis, in the coming quarters.

The company, which is yet to receive a clean chit from Sebi in the ongoing whistleblower case, said it has provided all the necessary information that the market regulator asked for and that the management is cooperating fully.

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