Infosys, the second largest IT exporter, on Thursday reported a 30 per cent year-on-year (YoY) rise in consolidated net profit at Rs 7,969 crore for the March quarter compared with Rs 6,134 crore in the same quarter last year. This is against a flattish profit growth that analysts were expecting ahead of Infosys quarterly results. Tata Consultancy Services, a larger peer, reported 9 per cent YoY profit growth for the quarter.
Infosys FY25 revenue, margin guidance
For FY25, Infosys has guided for 1-3 per cent growth in revenue in constant currency (CC) terms. This was against its revised growth guidance of 1.5-2 per cent for FY24. Infosys had suggested 4-7 per cent revenue growth for FY24, before reducing it quarter by quarter. Infosys suggested margin guidance at 20-22 per cent, which was similar to the FY24 guidance.
The Bengaluru-based technology giant said its sales for the quarter was up 1.3 per cent YoY at Rs 37,923 crore against Rs 37,441 crore. Analysts were expecting sales growth in 3-4 per cent range. The IT firm announced a final dividend of Rs 20 and a special dividend of Rs 28 per share for FY24.
Revenues in constant currency terms (CC) terms remained flat YoY and declined 2.2 per cent. Dollar revenue came in at $4,564 million, up 0.2 per cent YoY. Infosys said its operating margin stood at 20.1 per cent, down 0.9 per cent YoY and 0.4 per cent QoQ.
Management commentary, deal wins
“We delivered the highest ever large deal value in the financial year 2024. This reflects the strong trust clients have in us. Our capabilities in Generative AI continue to expand. We are working on client programs, leveraging large language models with impact across software engineering, process optimization, and customer support, said CEO and MD Salil Parekh.
Infosys said its large deal total contract value (TCV) for the quarter was $4.5 billion, with 44 per cent being net new. This was higher than $2-3 billion deal wins that analysts were expecting earlier.
Capital allocation policy
Infosys announced a final dividend of Rs 20 per share for the financial year 2023-24. It also announced a special dividend of Rs 8 per share. With this, Infosys has declared a total dividend of Rs 46 for the year if one included an interim dividend of Rs 18 per share that it announced post its second quarter results.
The Infosys board in its meeting held on April 18, 2024 has reviewed and approved the capital allocation policy for the next 5 years from FY25 – FY29 after taking into consideration the strategic and operational cash requirements as below.
“Effective from financial year 2025, the Company expects to continue its policy of returning approximately 85 per cent of the free cash flow cumulatively over a 5-year period through a combination of semi-annual dividends and/or share buyback/ special dividends subject to applicable laws and requisite approvals, if any.” Infosys said.
Update on financial services client During Q4, Infosys had rescoping and renegotiation of one of the large contracts in the financial services segment leading to a one-time impact of approximately 100 basis points in Q4. Nearly 85 per cent of the scope of the contract continues as-is.
Free cash flows at 11 quarter high
Infosys said its free cash flow (FCF) of $848 million in Q4 was highest in the last 11 quarters driven by relentless focus to improve working capital cycle.
"Consistent with the objective of giving high and predictable returns to shareholders, the Board has approved the capital allocation policy under which the company expects to return 85 per cent over the next 5 years and progressively increase annual Dividend Per Share”, said Jayesh Sanghrajka, CFO.
“Operating margin expansion in the medium-term and improving cash generation continue to remain our priorities underpinned by early success in Project Maximus”, he said.