Infosys is likely to report about 15 per cent rise in year-on-year (YoY) net profit on a 20 per cent rise in net sales for the March quarter. Ebit margin is expected to expand for the IT major, but marginally. Deal wins are expected to be flattish on a sequential basis.
Analysts largely expect Infosys to guide for 5-8 per cent revenue growth in constant currency (CC) terms and 21-23 per cent Ebit margin for FY24. All eyes would be on large deals intake and update on client conversations.
This is in the backdrop of US regional banks and European banks crisis, and potential economic slowdown in the developed markets. Re-allocation of responsibilities and portfolios of Mohit Joshi (who exited company as President in March), positioning in vendor consolidation and cost take out opportunities and the impact of recent banking sector events on BFS client spends will be tracked keenly.
Profit, sales, margins
HDFC Institutional Equities expects Infosys to guide for 5-8 per cent growth in FY22 CC revenues. It expects the IT firm to log 14.9 per cent YoY rise in net profit at Rs 6,533 crore on a 20.6 per cent YoY rise in sales at Rs 38,930 crore. It sees Ebit margin at 21.8, up nearly 30 basis points on both sequential and YoY basis.
Emkay Global offered similar estimates. This brokerage sees profit figure at Rs 6,530 crore. It sees revenue growing 19.8 per cent YoY at Rs 38,680 crore. Ebit margin is seen at 24.60 per cent, up 25 basis points.
"We expect 1 per cent QoQ dollar revenue growth in Q4 after factoring in 100 bps cross-currency tailwinds. EBIT margin is expected to expand 30 bps on account of operating efficiencies, pyramid rationalisation, subcontracting cost optimisation, lower pass-through costs, and cross-currency tailwinds," it said while expecting FY24 CC revenue guidance at 5-7 per cent YoY and Ebit margin guidance at 21- 23 per cent.
March is a seasonally weak quarter for the company, said Kotak Institutional Equities. It does not expect material incremental revenue contribution from the Daimler deal.
Deal wins, headcounts
After record large deal wins of $3.3 billion in December quarter, Nirmal Bang Institutional Equities believes that March quarter deal wins will be flattish to possibly marginally lower on QoQ basis.
"We expect net headcount reduction in 4QFY23 as Infosys tightens its operating parameters. Also, third-party items in the P&L statement will be keenly watched as these have been much higher compared to peers (6-7 per cent run rate) and has been margin dilutive for the company. The unbilled number is also a close monitorable as it has been rising significantly compared to other players," it said.
Kotak said deal TCV and pipeline will take centre stage, especially the large deals.
"Quantum of pipe, nature of large deals, pace of decision-making and drivers of consolidation trend will be important focus points. We expect healthy TCV of wins powered by large deals. Composition of growth matters—a front-ended growth guidance will give a lot more comfort and even create scope for upgrades. A back-ended growth guidance may not be viewed favourably. Attrition will likely moderate further as supply side pressures ease. Easing of attrition will aid in realising operational efficiencies," it said.
Dividend, dividend history
Meanwhile, Infosys would also consider a final dividend for the FY23 on Thursday. Infosys announced a dividend of Rs 16.50 per share worth Rs 6,940 crore in FY23 so far. It paid Rs 6,309 crore in total dividends in FY22 and Rs 5,112 crore dividends in FY21. This is against Rs 11,391 crore dividends by HCL Technologies and Rs
7,686 crore dividend by TCS in FY22. TCS paid Rs 8,510 crore in dividends in FY21 and HCL Tech Rs 2,714 crore. Infosys commands a dividend yield of 2.20 per cent against TCS' 1.34 per cent and Wipro's 1.62 per cent. Tech Mahindra (4.10 per cent) and HCL Technologies (3.86 per cent) offered the highest dividend yield in the tier I pack, as of latest closing.
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