Infosys Q2 net profit falls 1.7% at Rs 4,037 crore

Infosys headquarters in Bengaluru (Photo by Reuters)

In line with market expectations, Bengaluru-based IT giant Infosys has clocked net profit of Rs 4,037 crore for the quarter ended September 30, 2019, down 1.8% as compared with Rs 4,110 crore for the corresponding quarter last year, owing to the increase in employee benefit cost.

The company had clocked the net profit of Rs 3,802 crore for the first quarter ended June 30, 2019.

On the other hand, the company's revenues jumped by healthy 9.8%, to Rs 22,629 crore, from Rs 20,609 in the corresponding quarter last year.

The company witnessed its employee benefit cost jump by 13.6% to $1.6 billion, in a bid to reduce the attrition level in the company. The cost of sub-contractors also jumped by 8.3% to $234 million.

The attrition level in the company came down from a peak of 23.4% to 21.7% during the quarter.

The company also increased the lower end of its revenue guidance to 9%-10%, from 8.5%-10% earlier. The company maintained its upper end of guidance.

The digital business grew by healthy 38.4% and contributed $1.23 billion to the company’s revenues. On the other hand, the company’s core business declined by 0.7% during the quarter, contributing $1.98 billion to the company’s revenues.

The company signed new deals worth $2.8 billion, up from $2.7 billion in the last quarter – taking the total in the first half of the year to $5.5 billion, a jump of 75% on a year-on-year basis. There were 13 large deal wins for the company during the quarter – with four each in financial services and the retail vertical. The US, which contributes highest to the company’s revenue, gave the company six large deal wins in the quarter.

Owing to increased dependence on the digital business, the company also witnessed improvement in its margins. The operating margins of the company improved on a sequential basis by 120 bps to 21.7% -- still at the lower end of the margin guidance of 21%-23%.

Speaking about the increase in the margins, Parekh said, “Six of our seven large segments are all showing double-digit growth. We had good growth in financial services in the second quarter and are seeing good demand."

He did, however, state that the escalating trade war between China and the US, alongside some impact of Brexit might hamper growth in the European business.

The company, which was once bellwether when it comes to the margins, attributed the phenomenon to the increase in the investments that company has been making of late.

While the banking, financial services and insurance (BFSI) – the biggest contributor to the company’s revenues – jumped by 10.3%, despite some softness in the European banks.

However, the consumption slowdown has hit the company’s growth in the retail vertical – which saw a decline of 0.6% in the reported currency. Company’s COO UB Pravin Rao, said that it has got more to do with the macros, as retail is most sensitive to the economic conditions.

The fastest-growing verticals for the company include – communication and energy, utilities, resources & services – both of which grew in excess of 17% in reported currency.

The gross profit of the company increased to Rs 7,550 crore, as against Rs 7,328 crore in the corresponding quarter last year.

During the day's trade, the company's scrips went up by Rs 32.8 per share at BSE, to close at Rs 815.70 per share.

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