Infosys ups sales outlook after outshining rivals in Q2

The value of large deals was the highest in the past seven quarters

India’s No.2 software-services exporter Infosys raised the lower end of its annual sales forecast after posting strong second-quarter results, in a sign that global recession fears were yet to make its clients curb their tech spending.

Infosys, which outperformed rivals Tata Consultancy Services and Wipro on the back of large deal wins, also unveiled plans to buy back shares worth Rs 9,300 crore.

Thursday’s news came after its rivals gave a cautious outlook citing fears of an economic meltdown in their key markets, United States and Europe. Industry leader TCS said clients were taking longer to decide on bigger deals, while smaller rival Wipro gave a weak outlook for the current quarter.

“While concerns around the economic outlook persist, our demand pipeline is strong,” Infosys Chief Executive Officer Salil Parekh said. “Along with (the) digital side of business, even we have seen improvement in our core business during this quarter. Also, revenue from our cloud segment has now reached more than $1 billion.”

The Bengaluru-based firm, seen as a bellwether of India’s $227 billion IT sector, sees revenue rising 15-16 per cent in the current financial year, versus its prior outlook of 14-16 per cent.

Infosys’s second-quarter net profit rose 11 per cent to Rs 6,021 crore, while its revenue rose 23.4 per cent to Rs 36,538 crore. Despite slowdown fears, all of its verticals grew in double digits during the quarter. The number of deal wins in the period was the highest in the past seven quarters. Its large deal total contract value (TCV) stood at $2.7 billion, compared with $1.7 billion in Q1.

Attrition falls

Operating margin rose to 21.5 per cent, a rise of 140 basis points over the last quarter, helped by a weaker rupee and efforts to optimise costs.

Despite the numbers, Infosys cut the top end of its margin outlook due to cost pressures. It now sees a margin range of 21-22 per cent versus 21-23 per cent earlier.

“We expect our margins to improve in the second half as attrition comes down. We are also going back to clients in multiple cases for raising prices as part of our contracts and our differentiated offerings,” Infosys Chief Financial Officer Nilanjan Roy said.

On the attrition front, Infosys saw its employee churn coming down by 1.3 per cent

over the last quarter to 27.1 per cent in the second quarter.

“We are seeing attrition coming down for three quarters in a row. My sense is that it will come down further,” Parekh said.

Infosys added 10,032 employees on a net basis to take its total headcount to 345,218

by the end of September quarter. The company, which has already hired 40,000

freshers till now, will take this to 50,000 or more for the whole fiscal year.

No moonlighting please

Infosys said while it supports various gig works inside the company, it was against moonlighting or dual employment.

“We support the aspirations of our employees to learn beyond their work. We will

support them to work on certain gig projects after prior approval of the managers.

We are also developing more comprehensive policies for that, while ensuring

contractual and confidentiality commitments are fully respected,” the company said.