Infosys cuts guidance despite 10.5% rise in Q4 net to Rs4,078 cr

Infosys on Friday announced a better-than-average revenue growth in the fourth quarter of the financial year ended 31 March 2019, but remained cautious of the prospects in the new financial year. With a 9 per cent growth in revenues against larger rival TCS’ 11.4 per cent growth, Infosys lowered its revenue guidance to 7.5-9.5 per cent in constant currency terms. 

Infosys posted a net profit of Rs4,078 crore for the quarter ended 31 March 2019, a 10.51 per cent increase from the Rs3,690 crore reported in the year-ago quarter. On a quarter-on-quarter basis its profit grew 12.96 per cent. 
Total revenue for the quarter increased 19.11 per cent YoY to Rs21,539 crore from Rs18,083 crore in the similar quarter last year. Analysts had projected revenues at Rs21,465 crore. 
The earnings numbers were announced post market hours, during which Infosys stock had risen mildly by 0.71 per cent to close at Rs748. 
The company recommended a final dividend of Rs10.50 per share for the financial year ended March 2019. After including the interim dividend of Rs7 per share, total dividend for FY19 stands at Rs17.50 per share. The payment is subject to shareholders’ approval in the annual general meeting scheduled for 22 June.
While TCS continues to be bullish about growth, Infosys’ outlook was below expectations as its investments in digital talent and its efforts toward localisation continue. Infosys forecasts compressed margins for the year ahead at 21-23 per cent, much lower than its margin of 22.8 per cent margin in FY19.
The IT major lowered its revenue guidance to 7.5-9.5 percent in constant currency terms. The company had set the revenue guidance at 8.5 to 9 percent in FY19 as opposed to 6-8 percent in FY18.
Sail Parekh, CEO, Infosys said, “We have full acceleration for the full year and therefore guidance, if you recall for the FY18 it was 6-8 per cent, we bumped it up to 7.5-9.5 percent. So from our perspective, it is a very strong movement of guidance in the growth direction. We have not actually cut it, 7-5 and 9.5 are in the range of growth we anticipate for the full year.”
In terms of margins, Parekh said the company is making significant investments in talent in the digital space, re-skilling and localisation to build a future-ready Infosys. “We will now see improved operating margin as we go ahead of FY2020,” he added.
Parekh completes a year as the CEO in Infosys and analysts say that the company has performed well under the new management. Parekh took over as the CEO of Infosys in January 2018.
On the other hand, TCS posted record high margins at 25.6 per cent, which its CEO Rajesh Gopinath said are the highest among the IT services globally. The company gave the margin guidance of 26-28 percent for FY20, again on the higher side.
TCS’s attrition rate was 11.3 percent as opposed to 20 per cent of Infosys. UB Pravin Rao, COO, Infosys said that the company is taking multiple measures bring the number of 15 percent.
However the digital front shows a healthy growth as investment in digital is beginning to pay dividends. Digital revenues now account for close to a third of total revenues and growing at upwards of 40 percent for both the companies.
In the quarter ended March 31, 2019 TCS’s digital revenue grew at 46.4 per cent year-on-year (YoY) and Infosys revenues grew 41.1 per cent in constant currency YoY.