At end of one bleak fiscal, Infy sees start of another
BFSI blues, US weakness slow revenue growth to 1.9%; co sees 1-3% growth in FY25
IT services major Infosys Ltd outlined its slowest growth guidance ever at the start of a financial year, expecting to grow its revenue 1-3% in constant currency terms in FY25. The dim guidance comes on the back of its weakest-in-history fullyear dollar-revenue growth of 1.9% for FY24, driven by revenue declines in its biggest business banking, financial services and insurance (BFSI), as also from its biggest region, North America.
Its previous slowest growth of 3% was in the year ended March 2010. In constant currency terms (which eliminates the effect of currency movement), Infosys’s FY24 revenue growth came in at 1.4%, lower than the 1.5-2% guidance it had given in January.
While declaring its fourth-quarter and full-year earnings on Thursday, the company said its Q4 (January-March 2024) revenue slipped sequentially by 2.1%, hurt by lower demand from US businesses and from banks.
Investors gave a thumbs-down to the results. In pre-market trading at the New York Stock Exchange, Infosys’s shares were down 8.3% to $15.56. The results were declared after market hours 18.56 6.2
29.08 7.7 1.9 in India.
However, the performance did not stop the company from announcing its largest acquisition yet on Thursday, a $480-million buyout of In-Tech, a German engineering research and development firm. In-Tech had $181 million in revenue last year and Infosys expects to close this acquisition 4.1 317,240 601,546 -7.6 -2.2 5.62 in the first half of the current fiscal.
Infosys’s CEO Salil Parekh clarified to a question from Mint that the company’s stated guidance for FY25 does not include the revenue growth that will be added from the acquisition of In-Tech, which should bring at least 1% growth to the company’s net revenue in FY25.
Infosys’s performance pales in comparison with market leader Tata Consultancy Services Ltd. Infosys ended FY24 with net revenue of $18.56 billion, with $350 million in incremental business. Comparatively, TCS added $1.15 billion in new business to end FY24 with $29.1 billion in revenue.
A Bloomberg poll of 45 analysts had predicted FY24 revenue of $18.5 billion and net profit of $2.94 billion from Infosys. The company’s FY24 net profit of $3.17 billion, a 6.2% rise from the year-ago period, beat this prediction.
In the March quarter, revenue topped $4.56 billion, down 2.1% sequentially and unchanged from the year-ago period. And net profit rose 30.6% sequentially (and 28.7% y-o-y) in Q4 to $959 million, higher than another Bloomberg estimate of $739 million by 32 analysts.
The improved profit was on account of a one-time $232 million income-tax rebate and a reversal of $5 million net tax provisions.
Excluding this tax largesse, Infosys’s FY24 net profit declined 1.7% compared to the year-ago period. The company’s operating margin was 20.7% at the end of last financial year, compared to 21% in FY23.