Infosys net plunges 30% in third quarter

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SME Times News Bureau | 12 Jan, 2019
Global software major Infosys on Friday reported Rs 3,610 crore consolidated net profit for the third quarter of fiscal 2018-19, posting nearly 30 per cent annual decline from Rs 5,129 crore in the same period a year ago.

In a regulatory filing on the BSE, the city-based IT behemoth said consolidated revenue for the quarter (Q3) under review, however, grew 20.3 per cent annually to Rs 21,400 crore from Rs 17,794 crore in the like period a year ago.

Sequentially too, net profit dipped 12 per cent from Rs 4,110 crore but revenue rose 3.8 per cent from Rs 20,609 crore a quarter ago.

Under the International Financial Reporting Standards (IFRS), net income declined nearly 37 per cent annually to $502 million in Q3 from $796 million a year ago and declined sequentially 13.6 per cent from $581 million a quarter ago.

Gross income under IFRS, however, grew 8.4 per cent to $2,987 million in Q3 from $2,755 million in the like period a year ago and 2.2 per cent sequentially from $2,921 million a quarter ago.

"Our net profit declined yearly and quarterly in rupees and dollars owing to impact of investments in sales, hiring locals and write off of value of Skaya and Panaya subsidiaries, which could not be sold till December," said the company in a statement here.

Though Skaya was valued at $18 million and Panaya $39 million for sale in the fourth quarter (January-March) of previous fiscal (2017-18), the company concluded in the third quarter of this fiscal that it was no longer possible to sell them at their value, as the proposals received from potential buyers was for lesser value.

"The company has concluded in December that it is no longer probable to sell the two subsidiaries by March 2019, resulting in their de-classification from 'held for sale'.

"On reclassification, the company recognized additional depreciation and amortization expenses of $12 million and an adjustment in carrying amount over recoverable amount of $65 million from Skava," said the statement.

The company also wrote-off the carrying value of $11 million in its associate DWA Nova LLC.

Though operating profit grew 11.8 per cent year-on-year (YoY) to Rs 4,830 crore in Q3 from Rs 4,319 crore, it declined 1.3 per cent sequentially from Rs 4,894 crore a quarter ago.

Under IFRS, operating profit was up marginally (0.9 per cent) to $675 million from $669 million a year ago, but declined 2.6 per cent sequentially from $692 million a quarter ago.

Operating margin declined sequentially to 22.6 per cent in Q3 from 23.7 per cent a quarter ago.

The outsourcing firm has revised revenue guidance upwards to 8.5-9 per cent in constant currency (CC) terms for the fiscal (2018-19) due to over 10 per cent revenue growth in CC and retained operating margin guidance at 22-24 per cent.

"As a growth driver, digital revenue grew 33 per cent year on year (YoY) to $942 million from $719 million a year ago and 5 per cent sequentially from $905 million, accounting for 32 per cent of the total revenue," said the company.

"With increased client relevance, we saw double digit YoY growth in Q3 on a constant currency basis", said Chief Executive Salil Parekh on the occasion.

The company also bagged a large deal valued at $1.57 billion, giving it confidence entering 2019.

"Volume growth was strong and revenue productivity stable despite the quarter being a seasonally weak. We had good growth across geographies and large business segments," said Chief Operating Officer Pravin Rao.

Noting that there was significant currency volatility during the quarter, especially between rupee and US dollar, interim Chief Financial Officer (CFO) Jayesh Sanghrajka said cash generation was strong during the quarter.

"Executing on the capital allocation strategy, we have announced a share buyback programme and a special dividend of Rs 4 per share."

The company added 101 clients during the quarter, as against 73 in the second quarter and 79 a year ago, taking the total number of active clients to 1,251 from 1,222 a quarter ago and 1,191 a year ago.

The company's blue scrip, however, ended at Rs 683.70 on the BSE at the end of Friday trading, gaining Rs 3.95 per share from Thursday's closing price of Rs 679.95 and opening rate of Rs 683.75.