Infosys posts fastest rise in Q1 revenues in a decade; reports 23% rise in net profit

India’s second largest IT services company Infosys on Wednesday posted a good set of first quarter numbers with strong growth in revenues and large deal wins, prompting the IT firm to raise the revenue guidance for the whole fiscal to 14-16 per cent.

The company posted a 22.7 per cent rise in its net profit at Rs 5,195 crore in the first quarter of the current financial year ended June as compared to Rs 4,233 crore reported in the same period of last fiscal.

The IT firm reported revenues of Rs 27,896 crore, a rise of 18 per cent over the same period of last fiscal and 6 per cent over the preceding quarter.

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In constant currency terms, the Bengaluru-headquartered firm posted its fastest revenue growth in a decade. For the quarter, revenues were at $3.78 billion, a rise of 16.9 per cent on a year-on-year basis and 4.8 per cent on quarter-on-quarter basis in constant currency terms. As compared to Infosys, its bigger peer Tata Consultancy Services (TCS) posted a sequential growth of 2.4 per cent in constant currency terms.

The IT firm witnessed 42.1 per cent growth YoY in its digital revenues during the first quarter.

Given the momentum in the revenue growth, Infosys raised its revenue growth guidance to 14-16 per cent for FY22 from the earlier guidance of 12-14 per cent.

“We grew at the fastest pace in Q1 in a decade in constant currency terms. This gives us confidence to increase our revenue growth guidance to 14-16 per cent,” said Salil Parekh, CEO and MD of Infosys. “Overall demand outlook remains very strong. With the economy opening up in various geographies, the demand is likely to continue.”

In the large deal space, Infosys posted another good quarter with large deal signings worth $2.6 billion coming in the first quarter as compared to $2.1 billion in Q4 of FY21.

“We have a strong quarter as far as large deals are concerned. We signed 22 large deals in the first quarter, of which nine were in the BFSI (banking, financial services & insurance) vertical with the rest coming from retail, manufacturing and other segments. Out of the total deals, 30 per cent were net new customers,” said Pravin Rao, Chief Operating Officer at Infosys.

During the quarter, operating margin of the IT firm witnessed a dip of 80 basis points to 23.7 per cent owing to wage hikes and other expenses.

“We remain confident of delivering on the margin guidance, underpinned by our comprehensive cost optimisation programme, despite increasing cost headwinds arising largely from compensation review, talent acquisition and retention,” said Nilanjan Roy, Chief Financial Officer of Infosys.

The company has guided for a margin guidance of 22-24 per cent for this financial year.

Attrition rises

During this quarter, Infosys added 8,334 employees to take its total headcount to 2,67,953. However, its voluntary attrition increased 300 basis points sequentially to 13.9 per cent during this period.

“As the demand for digital talent explodes, rising attrition in the industry poses a near-term challenge. We plan to meet this demand by expanding our hiring programme of college graduates for FY 22 to 35,000 globally,” said Rao.

He also said that the company could aim at bringing back 20-30 per cent people to offices in the next six months owing to a vaccination drive undertaken by the company.