India’s second largest software service provider Infosys posted a 3% year on year increase in net profit to Rs 3,726 crore, compared to Rs 3,606 crore in the corresponding quarter last year. A CNBC TV18 analyst poll predicted earnings at Rs 3,496 crore. Notably, these quarterly results are the first after veteran Nandan Nilekani began his second innings in the company, after Vishal Sikka’s controversial exit in August this year. Notably the company cut its revenue guidance to 5.5%-6.5% from 6.5%-8.5%. Operating margin came in at 24.2% as against CNBC TV18 poll of 23.6%. Consolidated EBIT was Rs 2,728 crore. In dollar terms, revenue for the IT bellwether rose 2.9 per cent sequential, while the revenue growth was 5.4 per cent QoQ on constant currency terms.
While analysts seem to be focused more on management commentary, Motilal Oswal had estimated company’s net profit to rise 1.8% on-year to Rs 3,600 crore. “The Infosys Board has two key issues to manage currently — one, ensuring stability by way of managing stakeholder sentiment and two, offering visibility by way of sharing concrete guidance,” Greyhound Knowledge Group CEO and Chief Analyst Sanchit Vir Gogia told PTI. “While visibility on the new CEO announcement is important, we at Greyhound believe Infosys board must also offer concrete guidance on the company’s stand on some of the initiatives that were launched in Vishal’s term,” Vir Gogia said.
“We continue to focus on executing on the theme of software enabled services and on accelerating growth of our new services portfolio.” said U B Pravin Rao, Interim CEO and Managing Director. “During the quarter, we responded quickly to the management and Board changes through proactive communication with all stakeholders minimizing any negative impact to the business and allowing us to deliver growth across all our large industry units.”
“Our focus on improving operational efficiencies enabled us to deliver stable margins in the quarter and at the same time provide compensation increases and higher variable payouts to our employees.” said M. D. Ranganath, CFO. He added, “We have taken several steps during the quarter towards our capital allocation policy covering Rs 13,000 crore share buyback, coupled with interim dividend of Rs 13 per share for enhancing shareholder returns.”
Vishal Sikka resigned on August 18 following series of allegations by co-founder Narayana Murthy, mainly over Rs 1,250 crore acquisition of Israel based IT firm Panaya after an anonymous whistleblower alleged wrong-doings in the deal. Most board members including the co-chairman R Seshasayee resigned soon after, and co-chairman Ravi Venkatesan stepped down to continue as an independent director.
Within a week, Nandan Nilekani returned to the board of the company after a gap of about seven years as non-executive chairman, while Chief Operation Officer UB Pravin Rao was given interim charge of Managing Director and CEO on August 24.