Infosys shares plunge 12% on weak Q4 earnings

Shares of India's second-largest IT services provider Infosys Ltd tanked as much as 12% in opening trade on Monday after the company's fourth-quarter results missed analysts' expectations.

The software services company's stock hit its 52-week low of ₹1,219 apiece on the BSE on Monday.

The slide in Infosys' share price comes as brokerage Motilal Oswal said the company's Q4 revenue growth is likely to have a dampening effect on its FY24 growth, particularly since it suggests a significant impact on growth from discretionary business, which has been facing pressure in the recent few months due to the macroeconomic slowdown.

"We expect FY24 revenue growth to be around 5.2% YoY in CC terms, which is near the lower end of guidance band, as it takes time for the mega deal opportunities to convert into order and revenues," Mukul Garg, research analyst at Motilal Oswal, said in a note.

Infosys has provided revenue guidance of 4-7% year-on-year in constant currency for FY24.

According to ICICI Securities, this guidance is weak, lower than the consensus estimate of 6-8% due to a lower exit growth rate. "Upper end of the guidance is a strong ask in the current uncertain demand environment and assumes a partial reversal of project ramp downs or a mega deal win, in our view," notes ICICI Securities. The brokerage forecasts Infosys revenue growth at 6.4% in FY24, closer to the higher end of the guidance.

Infosys, which released its earnings for the fourth quarter on April 13, reported a 7.8% year-on-year (YoY) rise in consolidated net profit at ₹6,128 crore for the January-March quarter. Revenue from operations surged 16% to ₹37,441 crore in Q4 FY23, as against ₹32,276 crore in the corresponding quarter last fiscal. Revenues in constant currency terms grew by 8.8% year-on-year and declined by 3.2% quarter-on-quarter.

Operating profit for the IT firm stood at ₹7,877 crore, up 13.2% as compared with ₹6,956 crore posted in the year-ago quarter. Operating margin contracted by 50 basis points to 21% in the fourth quarter.

Infosys' digital revenue stood at 62.9% of its overall revenue, logging a year-on-year growth of 15%.

For FY23, the Infosys board recommended a final dividend of ₹17.50 per share. Together with the interim dividend of ₹16.50 per share already paid, the total dividend per share for FY23 amounts to ₹34 which is a 9.7% increase over FY22. With this, the company has announced a total dividend of around ₹14,200 crore for FY23.

Infosys' attrition rate declined further in Q4 to 20.9% from 24.3% in the December quarter. The company's headcount stood at 3,43,234 employees at the end of the fourth quarter compared with 3,46,845 in December.

"As the environment has changed, we see strong interest from our clients for efficiency, cost and consolidation opportunities, resulting in a strong large deal pipeline. We have expanded our internal program on efficiency and cost to build a path to higher margins in the medium term. We continue to invest in our people and in supporting our clients," said Salil Parekh, CEO and MD, Infosys.