Robust Q1 bolsters Infy FY22 guidance

India's second largest IT services company Infosys posted a good set of first quarter numbers with strong growth in revenues and large deal wins, prompting the IT firm to raise the revenue guidance for the whole fiscal to 14-16 per cent.

Infosys posted 22.7 per cent rise in its net profit at Rs 5,195 crore in the first quarter of current financial year ended June as compared to Rs 4,233 crore reported in the same period of last fiscal. The IT firm reported revenues of Rs 27,896 crore, a rise of 18 per cent over the same period of last fiscal and up 6 per cent over the preceding quarter.

In constant currency term, the Bengaluru-headquartered firm posted its fastest growth in a decade. For the quarter, revenues were at $3.78 billion, a rise of 16.9 per cent on year-on-year basis and 4.8 per cent on quarter-on-quarter basis in constant currency term. As compared to Infosys, its bigger peer Tata Consultancy Services (TCS) posted a sequential growth of 2.4 per cent in constant currency term.

The IT firm witnessed 42.1 per cent growth YoY in its digital revenues during the first quarter.

Given the momentum in the revenue growth, Infosys raised its revenue growth guidance to 14-16 per cent for FY22 from the earlier guidance of 12-14 per cent.

"We grew at the fastest pace in Q1 in a decade in constant currency term. This gives us confidence to increase our revenue growth guidance to 14-16 per cent," said Salil Parekh, CEO and MD of Infosys. "Overall demand outlook remains very strong. With economy opening up in various geographies, the demand is likely to continue."

In the large deal space, Infosys posted another good quarter with large deal signings worth $2.6 billion coming in the first quarter of FY22 as compared to $2.1 billion in Q4 of FY21.

"We have a strong quarter as far as large deals are concerned. We signed 22 large deals in the first quarter out of which nine were in BFSI (banking, financial services & insurance) vertical with rest coming from retail, manufacturing and other segments. Out of the total deals, 30 per cent were net new," said Pravin Rao, Chief Operating Officer at Infosys.

During the quarter, operating margin of the IT firm witnessed a dip of 80 basis points to 23.7 per cent owing to wage hikes and other expenses.

"We remain confident of delivering on the margin guidance, underpinned by our comprehensive cost optimization programme, despite increasing cost headwinds arising largely from compensation review, talent acquisition and retention," said Nilanjan Roy, Chief Financial Officer of Infosys. The company has guided for a margin guidance of 22-24 per cent for this financial year.

Among the verticals, seven verticals grew in double digit in the April-June period. Financial services vertical grew 22.6 per cent YoY basis, while retail grew 22.2 per cent. Life sciences is another vertical, which witnessed a growth of 21. 2 per cent during this period.

"Overall, we have a broad-based growth as seven out of eight verticals have double digit growth. Apart from strong demand in the BFSI segment, even demand in retail sector is coming back after a long time as economy opens up in many regions," said Pravin Rao, COO at Infosys.

During this quarter, Infosys added 8,334 employees to take its total headcount to 2,67,953. However, its voluntary attrition increased 300 basis points sequentially to 13.9 per cent during this period.

"As the demand for digital talent explodes, rising attrition in the industry poses a near-term challenge. We plan to meet this demand by expanding our hiring programme of college graduates for FY 22 to 35,000 globally," said Rao.

He also said that the company could aim at bringing back 20-30 per cent people to offices in next six months owing to vaccination drive undertaken by the company.