Infosys falls over 5% on profit miss, attrition worries

Infosys falls over 5% on profit miss, attrition worries

The sharp increase in attrition is a cause of worry and could be a risk to the top end of margin guidance

Infosys reported a voluntary attrition rate of 15.2 per cent for its IT services segment during the March quarter. Credit: Reuters File Photo

Infosys Ltd shares fell as much as 5.5 per cent on Thursday, a day after the Indian software services firm reported quarterly net profit below analysts' estimates and on worries that a spike in voluntary attrition could squeeze margins.

The Bengaluru-headquartered company posted a 17.5 per cent rise in net profit to 50.76 billion rupees ($675.4 million) in the three months to March 31. Analysts had estimated a profit of 51.93 billion rupees, according Refinitiv data.

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The sharp increase in attrition is a cause of worry and could be a risk to the top end of margin guidance, Investec analysts said in a note.'

On Wednesday, Infosys Chief Executive Officer Salil Parekh said in a call with reporters that the company was targeting margins of 22 per cent to 24 per cent for the full year 2021-22.

Infosys reported a voluntary attrition rate of 15.2 per cent for its IT services segment during the March quarter, up from 10 per cent in the preceding quarter.

"Considering the strong deal momentum, a continued increase (in attrition) would require higher lateral additions and potentially meatier salary increases to retain talent," Investec said.

In addition to employee costs, Infosys will also have transition costs from large deals and return of some expenses which were saved because of the Covid-19 pandemic, Investec analysts said.

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On Wednesday, Infosys forecast annual revenue growth of 12 per cent to 14 per cent in constant currency terms for the year to end-March 2022, buoyed by client demand for its digital services during the pandemic.

Quarterly revenue rose to 263.11 billion rupees from 232.67 billion rupees a year earlier.

The company recommended a final dividend for the year of 15 rupees per share, and approved a share buyback of up to 92 billion rupees.

Bigger rival Tata Consultancy Services on Monday posted a 15 per cent jump in profit on cloud services demand, while smaller counterpart Wipro will report results later on Thursday.