Infy cuts FY24 guidance despite good Q2 show

At the end of September quarter, employee attrition stood at 14.6 per cent, a fall of 2.7 per cent over the previous quarter. Infosys saw it headcount shrinking by 7,530 in Q2 at 328,764

Pressure on spending

♦ The company bagged highest ever large deals in Q2

♦ No campus placement this year for Infosys

♦ Employee count fell by 7,530

♦ Hope of H2 recovery dashed

♦ Discretionary spends are low

♦ Decision-making is slow

♦ Volumes are still under constraint

Large and mega deal wins position us very well for the future, but we see the ramp ups from these deals towards the backend of the year. We see telecom, hitech, payment and investment banking in the financial services along with some segments of retail going through a slowdown - Salil Parekh, CEO and MD, Infosys

Bengaluru: Infosys on Thursday posted a strong set of second quarter numbers though the IT firm again revised its revenue guidance downwards, dashing hopes of any recovery in the second half of the ongoing financial year.

The IT major posted a net profit of Rs6,212 crore in the second quarter ended September, which was a rise of 3.2 per cent over the same period last fiscal year. It reported a consolidated revenue of Rs38,994 crore, growth of 6.7 per cent year-on-year basis. In dollar term, revenue was at $4.72billion, which was rise of 2.3 per cent in constant currency over the previous quarter.

The company posted its highest-ever large deal worth $7.7 billion during the second quarter out of which 48 per cent was net new.

Despite such large deal wins, Infosys revised the upper end of its revenue guidance downward to 1-2.5 per cent for FY24 as compared to 1-3.5 per cent provided earlier.

“We continue to see the entire environment where the digital transformation programmes and discretionary spends are low and decision-making is slow. The volumes are still under constraint and keeping that in mind, we have given a guidance for the full fiscal year,” said Salil Parekh, CEO and MD of Infosys at the post results press conference.

“Large and mega deal wins position us very well for the future, but we see the ramp ups from these deals towards the backend of the year. As far as sectors are concerned, we see areas of telecom, hitech, payment and investment banking in the financial services along with some segments of retail going through a slowdown,” he added.

In the operating margin front, the company posted 21.2 per cent margin, which was an improvement of 40 basis points over the past quarter.

“Our Q2 operating margin of 21.2 per cent demonstrates the early benefits of recently unveiled marginimprovement plan,”said Nilanjan Roy, Chief Financial Officer. The company said that it is gaining market share in the cost optimization deal space owing to several deal wins in the past quarters.

Among the verticals, the largest vertical BFSI saw a decline of 7.3 per cent YoY, while communication declines by 4.3 per cent. However, growth in manufacturing, retail, and life sciences remained robust for the Bengaluru-headquartered IT firm.

As far as geographies are concerned, growth in North America remained subdued with a tepid 1 per cent rise, while Europe witnessed a growth of 5.4 per cent.

After several quarters, Infosys saw sharp fall in its employee attrition with improvement in its employee utilization levels. At the end of September quarter, employee attrition stood at 14.6 per cent, a fall of 2.7 per cent over the previous quarter. Infosys saw it headcount shrinking by 7,530 in Q2 at 328,764, which is third consecutive quarter of decline for the company.

In a surprise move, Infosys said it wouldn’t go for the campus placement this year owing to its sound bench strength of freshers. “We have hired around 50,000 freshers last year, based on our demand projections. Now, we have a good bench strength of freshers, who are getting skilled in many emerging technology areas. So, there is not going to be any campus placement this year. We will honour all our campus offers given last year,” Roy of Infosys said. He also said that it will roll out wage hikes from November 1 of this year for its employees. The company announced an interim dividend of Rs 18 per share for shareholders.