Infosys Ltd on Wednesday raised its annual revenue growth forecast on continued strength in its digital services business as clients, buffeted by the Covid-19 pandemic, digitise their processes to save costs.
India’s second-largest software services company raised its revenue growth guidance to 2-3% for the year to March 31 from the earlier 0-2% in constant-currency terms. On Tuesday, rival Wipro Ltd, too, had forecast revenue to grow as much as 3.5% in the fiscal third quarter. “Clients have embarked on a digital transformation journey with a lot of focus on cost optimisation, automation and, in some cases, consolidation of vendors,” said Salil Parekh, chief executive and managing director of Infosys.
Infosys’s profit for the quarter to September rose 20.5% to ₹4,845 crore from a year ago. Revenue grew 8.6% to ₹24,570 crore, driven by demand from companies in the financial services, high tech and life sciences sectors. The closely-watched dollar revenue grew 3.2% from a year ago, and 6.1% sequentially to $3.31 billion on the back of large deal wins worth $3.15 billion. Operating margin expanded to 25.4% from 22.7% in the preceding three months.
“Free cash flows grew significantly in H1 driven by our consistent focus on liquidity and cash management. Consequently, we are increasing our interim dividend per share by 50% to ₹12,” said Nilanjan Roy, chief financial officer at Infosys.
Infosys expects its operating margin for FY21 to be in the range of 23-24% as it continues with cost optimisation measures like cutting on travel and visa costs and other discretionary spending. The Bengaluru-based firm, which has been betting big on cloud and emerging tech, saw its digital revenue grow 25.4% in constant currency terms to $1.57 billion, contributing 47.3% to the total revenues for the September quarter.
“While it’s a mixed bag, the industry has shown some early shoots of recovery. The whole wave of digital is helping IT services firms as it has led to fresh investments in technology,” said Sanchit Vir Gogia, CEO and chief analyst, Greyhound Research. Infosys’s voluntary attrition rate in the IT services unit fell to 7.8% in the September quarter from 11.7% in the preceding quarter. To further contain attrition, the company said it will roll out salary increments and promotions across levels effective January 1 and provide 100% variable pay and a one-time special incentive in Q3 to junior employees.
Financial services and retail segments contributed close to half of the revenue. While revenue from financial services grew 2.9%, retail revenues fell 0.3% from a year ago in constant-currency terms.
Infosys declared its earnings after the end of trading in Mumbai on Wednesday. The company’s shares fell 1.9% to close at ₹1,136.10 on BSE. However, the company’s American Depository Receipts (ADRs) rose more than 5% on NYSE on Wednesday.