Infosys Q3 net profit rises 13% to 6,586 cr

Bengaluru: Infosys, India's second largest IT services exporter, on Thursday posted a better-than-expected third quarter performance with sound revenue growth, steady operating margin and strong large deal momentum amid demand slowdown concerns. On the back of robust deal pipeline, the Bengaluru-headquartered firm raised its revenue growth rate outlook to 16-16.5 per cent for FY23 from 15-16 per cent earlier, though it retained it margin guidance in 21-22 per cent.

However, the company flagged up concerns relating to slackening demand in mortgage and investment banking within BFSI vertical in the US apart from slow client spending in telecom, retail, and hi-tech verticals. In Europe, the company sees pockets of weakness though there are many areas where technology spending remains intact. In the quarter ended December, Infosys posted 13.4 per cent rise in its net profit at Rs6,586 crore compared to Rs 5,809 crore reported a year earlier. Its revenue stood at Rs38,318 crore, an increase of 20.2 percent over the same period last year. Digital revenue constituted 63 per cent of total turnover.

Revenue was at $4.66 billion, a rise of 2.4 per cent over the past quarter in constant currency term. In comparison, its larger peer Tata Consultancy Services posted a two per cent growth in sequential term. Infosys posted a strong deal pipeline with winning of large deals worth $3.3 billion, highest in eight quarters as against $2.7 billion bagged last quarter. The company said its deal pipeline continued to be strong as it entered the fourth quarter.

"Our revenue growth was strong in the quarter, with both digital business and core services growing. As reflected in thelarge deals momentum, we continue to gain market share. We are seeing different demand environments for different industries. Mortgage, investment banking, telcos, high-tech, retail segments are witnessing some growth constraints, while we are seeing strong growth in energy & utilities, manufacturing, and other verticals," said CEO & MD of Infosys, SalilParekh.

On concerns over Europe, Parekh said: "There are more concerns in Europe than the US. We will see how this plays out. But there are differences within European economy with good traction in some industries."

During the December quarter, which is a seasonally weak one owing to more furloughs, Infosys' operating margin remained steady at 21.5 per cent. While margin got benefits of 40 basis points (0.4 per cent) due to rupee fall and 70 bps from cost optimisation moves, furloughs impacted margins adversely by 80 basis points. "As utilisation goes up with freshers joining projects, we can bring down subcontractor cost. Also, we will try to pass on some costs. Pricing discounts have come down substantially over the years. So, we have many levers of improving margin," said Nilanjan Roy, Chief Financial Officer of Infosys.

The company also saw its attrition number coming down by 2.8 per cent to 24.3 per cent in Q3. In coming quarters, attrition expects attrition coming down further.In December quarter, it added 1,627 employees taking its total headcount at 3,46,845.