Infosys ups its guidance for FY21; declares one-time incentive for staff

KEY HIGHLIGHTS

• Upward revision of FY21 revenue guidance to 2-3% in constant currency from the earlier 0-2%
• Upward margin guidance revision to 23-24% from 21-23%
• Large deal wins with the total contract value of $3.15 billion
• To pay a one-time incentive to junior employees; resumes appraisals

Bengaluru-based IT giant Infosys reported a sequential dollar revenue increase of 6.1 per cent in the second quarter of FY21 with revenues coming in at $3,312 million. The company's digital revenues stood at $1,568 million, constituting 47.3 per cent of the total revenues. Infosys revised its full year revenue guidance to 2-3 per cent from the earlier 0-2 per cent range. The company also revised its operating margin outlook for the year to 23-24 per cent from the earlier range of 21-23 per cent.

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CEO Salil Parekh said the upward revision on revenue and margin is a reflection of the increased deal traction and increased client confidence. "A lot of that comes from the digital work that we are doing with our clients on their transformation journey and how we are supporting them in the cloud business," he said.

Infosys's operating margins expanded by 270 basis points to 25.4 per cent in this quarter, compared to 22.7 in Q1. CFO Nilanjan Roy explained the margin improvement to be a result of an early three-pronged approach to cost management undertaken at the beginning of the year. Decision to defer costs such as promotions, wage hikes, hiring, cut discretionary expenditure such as travel or brand expenditure, etc., and strategic cost levers of onsite - offshore mix, pyramid, automation, etc., resulted in the margin expansion.

"Specifically in quarter two (Q2), our margins went up sequentially by 2.7 per cent, where 100 bps was from pricing," he said while adding that improved utilisation rates, cutting down other discretionary spends and higher offshore mix also helped in margin expansion.

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Segment revenues in BFSI, retail, hi-tech, life sciences saw marginal improvements. "From a financial services perspective we continue to see good performance both on year-on-year and sequential basis. Areas on spend include in mortgage processing, in payments space, in lending, and particularly banks are also investing heavily on enabling remote ways of working, advisory, digital banking and retail banking," said Pravin Rao, COO.

The company also announced a 100 per cent variable payout to its employees for the quarter and a special onetime incentive for its junior employees. "The salary increase process will restart now and will be effective January 1, 2021. We restarted promotions at junior levels last quarter and this will be expanded to all our levels," said Salil.

Infosys has also declared an interim dividend for its shareholders at Rs 12 per share.

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