Infosys confident of maintaining margin level in coming quarters

Bengaluru: India's second-largest IT services firm Infosys is confident of maintaining the momentum in operating margin in the coming quarters despite wage hikes and a possible rise in general & administrative (G&A) expenses.

"As we look into the next year, in Q4 yes, we will have the impact of wages coming in from Q4. And during the rest of the year, there may be some travel impact as the vaccines are rolled out across, but parallelly we have seen that in this year as well we have been able to deploy all our cost optimisation levers quite aggressively during this time," said Nilanjan Roy, Chief Financial Officer at Infosys. "So, we are quite confident that we have these cost optimisation plans in place to negate some of the costs, which we will see coming up," Roy added.

In the quarter ended December, Infosys posted an operating margin of 25.4 per cent, which was 350 basis points higher than the corresponding period of last fiscal. The operating margin was 10 basis points higher than the previous quarter.

The Bengaluru-headquartered company has revised its margin guidance for FY21 to 24-24.5 per cent from 23-24 per cent earlier on the back of less travel and utility costs apart from deferring expenses on account of salary hike, bonuses, and other staff-related costs.

As the IT services firm is planning to roll out wage hikes from the fourth quarter (January-March period), it expects some impact on its operating margin. However, CFO is confident of minimising the impact through other cost levers.

On the margin profile of large deals, Roy said that though there would be pressure on margins during the initial years, it would improve over the life cycle of the contract.