Infosys Q4 profit up 6.1% y-o-y, skips FY21 guidance

Infosys, India’s second-largest software services company, on Monday posted a 6.1% year-on-year (y-o-y) rise in its net profit for the fourth quarter ended March 2020, while quarter-on-quarter (q-o-q) profit fell 3.1% as the Covid-19 (novel Coronavirus) pandemic hit businesses of its clients globally across sectors.

The Bengaluru-based IT firm’s profit during the quarter under review stood at ₹4,321 crore, up from ₹4,074 crore, a year ago. For the preceding December quarter, net profit was ₹4,457 crore.

Amid low visibility on future business due to the Coronavirus pandemic, Infosys refrained from providing revenue and margin guidance for FY21 at this stage, citing business uncertainty emanating from Covid-19. It will provide guidance after visibility improves. “The company anticipates a continued slowdown in the near term influenced by a broad-based global economic recession. With some impact due to project deferrals and softening of discretionary spends, there will be some margin pressure in the near term,” Infosys said in a filing to the exchanges.

The IT-services company said that it has taken various measures to optimise its cost structure and operational rigour.

The Infosys management clarified that it will “honour” all the job offers that it has extended, including campus (freshers) and lateral hiring, and it is also not looking to currently lay off anyone because of the impact of the Coronavirus. However, the IT firm will continue with its performance-based exits. For now, it has suspended all promotions and increments for the year. “We will revisit as the situation evolves,” the company said, adding that it is not looking at putting its employees on furlough leave. (Furloughs are typically unpaid leave of absence.)

While announcing the earnings, the Infosys management spoke about how it is handling the pandemic situation and its impact on its outsourcing business.

“While the immediate short-term will be challenging, looking ahead, we can see that there is a strong interest to consolidate with partners with high-quality and agile service delivery and strong financial resilience. I am confident we will emerge from this stronger,” said Infosys CEO and MD Salil Parekh, adding that 93% of the company’s global workforce is currently working from home.

As of March 2020, the IT firm’s total workforce stood at 242,371 employees.

“The impact caused by Covid-19 since the last few weeks of March has led to significant displacement in the operating model while severely testing business continuity plans of companies,” said Infosys COO U.B. Pravin Rao. “We are also looking at various measures to bring cost under control. Our plan is to come back to work in a gradual manner. In Phase I, we expect less than 1% of our workforce to come to offices. This will last for three to four weeks. Gradually over the weeks we will increase the workforce at offices.”

For the March quarter, the company’s revenue was up 8% at ₹23,267 crore as against ₹21,539 crore during the corresponding period last year. Quarter-on-quarter revenue was marginally up by 0.8%. For the full year 2019-20, revenue grew by 9.8% in constant currency terms. Software-services companies typically use the constant currency method to eliminate the effects of exchange rate fluctuations while calculating financial results.

“We had an exceptional year in financial year 2020 with growth of 9.8% and operating margin of 21.3%,” Parekh said.

In dollar terms, Infosys reported revenue of $3,197 million for the March quarter, up 4.5% y-o-y, while it declined 1.4% q-o-q. Operating profit for the quarter stood at $674 million, up 2.6% y-o-y.

“Our relentless focus on liquidity will be supported by our strong balance sheet of $3.6 billion cash, backed by accelerated cost take-outs and operational rigour. The final dividend of ₹9.50 per share is testimony of a strong free cash flow performance for FY20,” said Infosys CFO Nilanjan Roy. As of March 31, 2020, Infosys had zero debt.

Infosys said that it has appointed Israeli entrepreneur Uri Levine, who co-founded traffic and navigation app Waze, as an independent director, effective April 20, 2020. D.N. Prahlad, who was an independent director, has resigned from the company.

Shares of Infosys closed at ₹652.90, up 3.75%%, on the BSE on Monday, while the Sensex ended the day marginally up by 0.19%.