Infy Q3 net plunges 30% on one-time hit

Coun­try’s No 2 soft­ware ex­porter, how­ever, cheers with guid­ance, ₹8,260-crore buy­back

The Hindu Business Line - - FRONT PAGE - GRN SOMASHEKAR

In a sea­son­ally weak quar­ter, In­fosys has re­vised its guid­ance up­wards on the back of con­tin­ued bil­lion dol­lar worth deals and growth of the dig­i­tal busi­ness. How­ever, it has re­ported a 30 per cent drop in net profit to ₹3,609 crore due to a one-time hit on its Panaya and Skava ac­qui­si­tions.

In­dia’s sec­ond-largest soft­ware ex­porter gave a rev­enue guid­ance of 8.5-9 per cent, higher than the 6-8 per cent guid­ance which it had is­sued at the be­gin­ning of 2019 fis­cal. In­fosys also re­ported a 20.3 per cent growth in rev­enues to ₹21,400 crore on a year-on-year ba­sis, which beat ex­pec­ta­tions of the street for the sec­ond con­sec­u­tive quar­ter.

As ex­pected, the com­pany’s board cleared a buy­back of eq­uity shares worth ₹8,260 crore, the sec­ond in as many years, at a price not ex­ceed­ing ₹800 per share. A spe­cial div­i­dend of ₹4 per share has also been an­nounced.

“We seem to be in a good po­si­tion as our ser­vices are find­ing in­creased rel­e­vance among clients In­fosys MD & CEO Salil Parekh flanked by COO UB Pravin Rao (left) and in­terim CFO Jayesh Sanghra­jka at a press meet in Ben­galuru

and I am happy I had a strong first year,” said Salil Parekh, CEO and MD.

Plans for Panaya, Skava

While the rev­enues and guid­ance were pos­i­tives, In­fosys saw a big dip in prof­its on a yearly ba­sis, due to a one-time hit on the Skava and Panaya ac­qui­si­tions and per­sis­tently high sub­con­tract­ing costs.

The com­pany, un­der the as­sets held for sale sec­tion, said that on

de-clas­si­fi­ca­tion, it has recog­nised ad­di­tional de­pre­ci­a­tion and amor­i­ti­sa­tion ex­penses of $12 mil­lion and a re­duc­tion of $65 mil­lion in the value of Skava.

“We plan to re­pur­pose Skava’s mi­cro ser­vices based busi­ness and re­fo­cus on Panaya’s suite of prod­ucts,” said Parekh.

Busi­nessLine was the first to re­port about In­fosys’ plans to lev­er­age Panaya and Skava’s li­cences and thereby keep them un­der its own fold.

In­dus­try an­a­lysts said that this dip is largely due to in­creas­ing in­vest­ments that the com­pany is mak­ing to hire lo­cals as stricter visa curbs in the US and other ge­ogra­phies are forc­ing IT com­pa­nies to hire lo­cally.

Ac­cord­ing to Harit Shah, Se­nior Re­search An­a­lyst –IT, Re­liance Se­cu­ri­ties, higher guid­ance and ro­bust deal wins sig­nify im­prov­ing rev­enue vis­i­bil­ity, even as cost pres­sures re­flect on mar­gins.

While In­fosys has re­tained its op­er­at­ing mar­gin guid­ance in the range of 22-24 per cent, at the end of Q3, mar­gins were at 22.6 per cent, the low­est in the last six quar­ters. In the third quar­ter, In­fosys also bagged large deals worth $1.57 bil­lion.

San­jeev Hota, AVP Re­search at Sharekhan by BNP Paribas, said that the in­crease in rev­enue guid­ance and bet­ter exit rate for fis­cal 2019 pro­vide com­fort on dou­ble-digit growth in the next fis­cal.


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