Infosys lowers revenue outlook on flat growth in Q4 (Roundup)

Bengaluru, April 13 : Global software major Infosys Ltd on Thursday gave a lower revenue outlook in single digit for fiscal 2017-18 on flat net profit and revenue growth in the fourth quarter (January-March) of fiscal 2016-17.

"Our revenue for fiscal 2017-18 (FY 2018) will grow 6.5-8.5 per cent in constant currency (cc) and 6.1-8.1 per cent in dollar terms from 7.4 per cent ($10.2 billion) annual growth posted in fiscal 2016-17 (FY 2017)," said the IT major in a statement here.

In rupee terms, the revenue growth is projected to be 2.5-4.5 per cent in FY 2018 as against 9.7 per cent (Rs.68,484 crore) annual growth posted in FY 2017.

In constant currency, the dollar was Rs.64.85 as on March 31.

The lower revenue guidance stems from flat (0.2 per cent) year-on-year (YoY) net profit growth and 0.9 per cent YoY revenue growth for the fourth quarter (Q4) in rupee terms.

The company had discontinued giving quarterly revenue outlook since FY 2014.

In a regulatory filing to the BSE earlier, the outsourcing firm reported Rs 3,603 crore net profit for Q4 as against Rs 3,597 crore in the same period year ago and Rs 3,708 crore quarter ago (October-December), a sequential decline of 2.8 per cent.

Revenue growth for Q4 was 3.4 per cent up year-on-year (YoY) to Rs 17,120 crore from Rs 16,550 crore in the like period year ago and flat (0.9) per cent sequentially from Rs 17,273 crore quarter ago.

"Unanticipated execution challenges and distractions in a seasonally soft quarter affected our overall performance," admitted Infosys Chief Executive Officer Vishal Sikka in a statement later.

Under the International Financial Reporting Standard (IFRS), net income grew 1.8 per cent YoY to $543 million in Q4 from $533 million in like period year ago but was flat (0.8 per cent) sequentially from $547 million quarter ago.

Gross revenue, however, increased 5 per cent YoY in Q4 to $2,569 million from $2,446 million in the same period year ago but flat (0.7 per cent) sequentially from $2,551 million quarter ago.

"At the same time, we saw many positive signs of our strategy execution and our software-led offerings showed strong momentum," asserted Sikka.

On annualized basis, net profit grew 6.4 per cent to Rs 14,353 crore for the fiscal under review (FY 2017) from Rs 13,491 crore in fiscal 2015-16, while revenue increased 9.7 per cent YoY to Rs 68,484 crore in FY 2017 from Rs 62,441 crore in previous fiscal (FY 2016).

Under the IFRS, net income for FY 2017 grew 4.3 per cent YoY to $2,140 million from $2,052 million, while revenue increased 7.4 per cent YoY to $10,208 million from $9,501 million in FY 2016.

"Operating margin at 24.7 per cent in Q4 was steady as we continued our sharp focus on operational efficiencies. Cash provided by operating activities during the fiscal was robust and exceeded $2 billion, a new high," claimed Chief Financial Officer M.D. Ranganath in the statement.

Liquid assets, including cash and investments shot up to $5,979 million ($6 billion) or Rs 38,773 crore for the fiscal.

Software exports account for 97 per cent of the company's consolidated revenue, with 62 per cent from North America, 22 per cent from Europe and 12.5 per cent from rest of the world, while its India operations contribute a mere 3.2 per cent in rupee terms.

"Looking ahead, it is imperative that we increase our resilience to the dynamics of the environment we face and remain resolute in executing our strategy, our path to transform the company and drive long-term value for all stakeholders," added Sikka.

The company added 71 clients in Q4 taking the total number of active customers to 321 for FY 2017, albeit four less than 325 in FY 2016.

The board declared a final dividend of 275 per cent (Rs 14.75) per share of Rs 5 face value for FY 2017.

As a result, total dividend payout is Rs 25.75 (495 per cent), including Rs 11 per share (220 per cent) interim dividend for the first six months (April-September).

The company has hinted at buyback of shares during FY 2018 up to Rs 13,000 crore ($2 billion).

"The Board had decided to pay shareholders by way of share buyback and/or dividend up to Rs 13,000 crore ($2 billion) during FY 2018," noted the statement.

As part of its revised capital allocation policy, the Board has approved to payout dividends up to 70 per cent in FY 2018 as against 50 per cent of post-tax profit till fiscal 2016-17.

"Further announcements on buyback will be made in due course," said the statement.

Following the recent boardroom battles on governance issues with the co-founders, especially its Chairman Emeritus N.R. Narayana Murthy, the company appointed its Independent Director Ravi Venkatesan as Co-Chairman of the Board.

"Venkatesan made valuable contribution to the company's development of strategic direction during his tenure since April 2011," recalled the statement.

On his elevation to the new executive post, 53-year-old Venkatesan said he was delighted to have the opportunity to work more closely with Board Chairman R. Seshasayee and Chief Executive Officer (CEO) Vishal Sikka and his leadership team. 

"Ravi will help me enhance the Board engagement in supporting the management in execution of the company's strategy," said Seshasayee in the statement.