Infosys Q4 Results: Profit Falls, Margin Narrows As Covid-19 Hurts Business; Suspends Guidance
The Infosys Ltd. logo is displayed on security tape at the company’s campus in Electronics City in Bangalore, India. (Photographer: Vivek Prakash/Bloomberg)  

Infosys Q4 Results: Profit Falls, Margin Narrows As Covid-19 Hurts Business; Suspends Guidance

Infosys Ltd.’s quarterly profit declined as the Covid-19 pandemic stalled economic activities and disrupted global trade.

Net profit fell 2.9 percent sequentially to Rs 4,335 crore in the quarter ended March, according to an exchange filing. The consensus estimate of analysts tracked by Bloomberg had pegged the bottom line at Rs 4,267 crore.

  • Revenue rose 0.8 percent quarter-on-quarter to Rs 23,267 crore—slightly lower than the Rs 23,460 crore-estimate.
  • Revenue in dollar terms fell 1.4 percent to $3,197 million.
  • Operating profit fell 2.7 percent to Rs 4,927 crore.
  • Margin narrowed 70 basis points to 21.2 percent.
  • Infosys has also temporarily suspended giving a revenue and margin guidance in the wake of the uncertainty from the Covid-19 crisis.

With the novel coronavirus outbreak shutting businesses across the world, software services firms like Infosys faced disruptions as they generate most of their business overseas and the bulk of it comes from clients in financial services, manufacturing and communications sectors.

“While the immediate short term will be challenging, looking ahead, we can see that there is a strong interest to consolidate with partners with high-quality and agile service delivery and strong financial resilience,” Chief Executive Officer Salil Parekh said in a media statement. “I am confident we will emerge from this stronger.”

The disruption of business is across sectors, Parekh said. “There is a concern from all industries in every geography. We see some discretionary spending coming under pressure.”

There will be some sort on a recessionary environment in the near term. We will accordingly employ our playbook to manage challenges in the near term.
Salil Parekh, CEO and MD, Infosys

The company got a 50-basis-point boost in its margin due to the depreciating rupee, Chief Financial Officer Nilanjan Roy said. But that was offset by the costs of transitioning almost 93 percent of its employees to work from home. There may be pressure on the margin in the near term, he said.

Infosys has also stopped new hiring, frozen salary hikes and temporarily suspended promotions in a series of, what Roy called, “no regret moves”. However, it will honour all commitments made when it comes to hiring.

Listing out the sectors where client spending may be impacted due to the Covid-19 crisis, Chief Operating Officer UB Pravin Rao said banking sector may see defaults, while insurers may collect lower premiums. In communications, a delay in the rollout of 5G will have an impact, while retail and manufacturing will be hit by broken supply chains, Rao said.

Other Highlights

  • Infosys won large deals worth $1.65 billion in Q4, compared with $1.8 billion in Q3.
  • Revenue from digital services now forms 41.9 percent of the top line.
  • Infosys announced a final dividend of Rs 9.5 per share.
  • Free cash flow for FY20 stood at $2.15 billion.
  • Total employee headcount stood at 2,42,371 at the end of the March quarter.
  • Attrition rate stood at 18.2 percent.

Shares of Infosys have fallen 12.2 percent during the January-March period. The stock closed 3.75 percent higher before the results were announced today compared with a 0.2 percent gain in the benchmark BSE Sensex.

Watch | Infosys management on Q4 results.

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