• OCTOBER 14, 2021

Infosys had an Exceptional Quarter Buoyed by Huge Deal Wins. Revenue Guidance Boosts Stock

Infosys had an Exceptional Quarter Buoyed by Huge Deal Wins. Revenue Guidance Boosts Stock

Exactly three months ago, when Infosys reported its June quarter results, we wrote to you about how Infosys reported fastest revenue growth in a decade.

At that time, shares of the company were trading at record high levels of Rs 1,500.

Skip forward to present, Infosys has yet again reported good set of numbers and the markets have cheered.

Stock of the company neared 52-week high today after posting stellar numbers. The company's American Depository Receipts Infosys ADR also ended higher in overnight trade.

While India's largest IT company - TCS - failed to meet street expectations on the quarterly results front, the second largest IT company - Infosys - did not disappoint.

Infosys continued to outperform TCS for the fourth straight quarter.

In terms of sequential revenue growth, TCS' dollar revenues were up 4% versus Infosys which increased by 6.3% on a constant currency basis.


Key financials

Infosys reported a net profit of Rs 54.3 bn for the quarter ended September 2021. This was up 11.7% on a year-on-year (YoY) basis and up 4.3% sequentially.

The profit came on the back of strong revenue contribution from Daimler deal, higher adoption of digital transformation by clients, broad-based growth across verticals and geographies, and strong seasonality.

Daimler and Infosys had announced a long-term strategic partnership for a tech-driven IT infrastructure transformation in December 2020. The total deal amount was about US$3.2 bn.

Revenue for the quarter came in 20% higher at Rs 296 bn. Both, topline and bottomline numbers came in above street expectations.

This was yet another exceptional quarter for Infosys with broad-based growth across segments as the company continued to grab market share.

Infosys' total contract value (TCV) for the quarter was US$2.15 bn. The figure looked softer when compared to US$2.6 bn it reported last quarter.

Here's what MD and CEO Salil Parekh said about the performance:

  • Our stellar performance and robust growth outlook continue to demonstrate our strategic focus and the strength of our digital offerings, as we witness a strong market opportunity with global enterprises rapidly accelerating their digital journeys.

Here's a table comparing financials on key parameters.

Financial Snapshot
(Rs m) Sep-21 Jun-21 Sep-20 YoY (%) QoQ (%)
Revenue 296,020 278,960 245,700 20.5% 6.1%
Total Operating Expenses 28,240 27,870 25,710 9.8% 1.3%
Operating Profit 69,720 66,030 62,280 11.9% 5.6%
Profit after tax 54,210 51,950 48,450 11.9% 4.4%
Free Cash Flow 52,720 63,630 49,890 5.7% -17.1%
Cash and Investments 328,010 377,270 336,010 -2.4% -13.1%
Data Source: Press Release

Infosys also announced interim dividend of Rs 15 per share for fiscal 2022. Record date for the same is 27 October and payment date 10 November.

The company also clarified its progress of bringing the income-tax (IT) portal to full functionality. Parekh said that the portal is seeing steady progress with 19 m returns being filed so far.


Segmental performance

Broad-based growth was visible across geographies and segments with is largest geography, North America, growing at 23.1% and the largest segment, financial services, growing at 20.5% YoY in constant currency.

Revenue from digital business contributed 56.1% to total revenues and was up 42.4% on a YoY basis.

All sectors reported double-digit growth. Manufacturing grew by 42.5% while retail by 17.2%. Its life science sector witnessed 26.1% growth.

Attrition remains a concern

Attrition is a concern for Infosys.

The attrition rate touched 20.1%, which was significantly higher than 13.9% is the previous quarter.

This comes after the company gave one of the highest number of promotions in the industry.

Infosys will ramp up campus hiring to 45,000 this year in a reflection of the ongoing talent crunch. The earlier target was of 35,000.

Infosys had a headcount of 279,617 employees at the end of September quarter.

Revenue guidance

The key highlight of this quarter was that Infosys raised its revenue guidance on the back of strong demand-led digital transformation.

Infosys raised its revenue growth guidance for fiscal 2022 to 16.5-17.5% from the earlier 14-16%.

Market experts were expecting guidance of 15-17%. Infosys narrowed the guidance band as Parekh said past deal wins, and future deal pipeline lent confidence to raise the guidance.

It maintained its margin forecast for fiscal 2022 at 22-24%.

CFO Nilanjan Roy suggested that there will be aggressive cost focus despite investments in talents and wage hikes.


How the stock markets reacted to Infosys' quarterly numbers

Infosys share price opened the day up by 2% at Rs 1,744 against its previous close of Rs 1,708.75.

It went on to touch a high of Rs 1,784.05, rallying more than 3% in early trade.

Overall, IT stocks are driving gains today with the Nifty IT index rising over 3%, on track for its best session in three months.

Apart from Infosys, Wipro and Mindtree also reported good results.

Infosys has a 52-week high quote of Rs 1,787.50 touched last month on 24 September. It has a 52-week low quote of Rs 1,051 touched on 2 November 2020.

Over the last one year, shares of the company have gained 53%.


Most of the brokerage houses have raise their targets after Infosys beat expectations.

At the current price of Rs 1,737, the company commands a marketcap of Rs 7,369.8 bn.

To know more, check out the latest shareholding pattern of Infosys.

About Infosys

Infosys is a large Indian IT services company, offering a range of digital and traditional IT services.

From humble beginnings in 1981, the company now counts itself among the largest and most respected global software firms. It's known around the world for its visionary management, work ethics, and corporate governance standards.

The company caters to industry verticals such as financial services, retail, communication, manufacturing, hi-tech, life sciences, energy, utilities, resources, and services.

Infosys has always had visionary management to guide the company through good times and bad.

Over time, Infosys' management has earned a reputation for being ahead of the curve in terms of human resource management policies and investor relations.

For more details about the company, you can have a look at Infosys company factsheet and quarterly results on our website.

You can also compare Infosys with its peers.

Infosys vs TCS

Infosys vs Wipro

Infosys vs HCL Tech

To know what's moving the Indian stock markets today, check out the most recent share market updates here.

Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such. Learn more about our recommendation services here...

Copyright © Equitymaster Agora Research Private Limited. All rights reserved.
Any act of copying, reproducing or distributing this newsletter whether wholly or in part, for any purpose without the permission of Equitymaster is strictly prohibited and shall be deemed to be copyright infringement.

LEGAL DISCLAIMER: Equitymaster Agora Research Private Limited (Research Analyst) bearing Registration No. INH000000537 (hereinafter referred as 'Equitymaster') is an independent equity research Company. Equitymaster is not an Investment Adviser. Information herein should be regarded as a resource only and should be used at one's own risk. This is not an offer to sell or solicitation to buy any securities and Equitymaster will not be liable for any losses incurred or investment(s) made or decisions taken/or not taken based on the information provided herein. Information contained herein does not constitute investment advice or a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual subscribers. Before acting on any recommendation, subscribers should consider whether it is suitable for their particular circumstances and, if necessary, seek an independent professional advice. This is not directed for access or use by anyone in a country, especially, USA, Canada or the European Union countries, where such use or access is unlawful or which may subject Equitymaster or its affiliates to any registration or licensing requirement. All content and information is provided on an 'As Is' basis by Equitymaster. Information herein is believed to be reliable but Equitymaster does not warrant its completeness or accuracy and expressly disclaims all warranties and conditions of any kind, whether express or implied. Equitymaster may hold shares in the company/ies discussed herein. As a condition to accessing Equitymaster content and website, you agree to our Terms and Conditions of Use, available here. The performance data quoted represents past performance and does not guarantee future results.

SEBI (Research Analysts) Regulations 2014, Registration No. INH000000537.

Equitymaster Agora Research Private Limited (Research Analyst)
103, Regent Chambers, Above Status Restaurant, Nariman Point, Mumbai - 400 021. India.
Telephone: +91-22-61434055. Fax: +91-22-22028550. Email: info@equitymaster.com. Website: www.equitymaster.com. CIN:U74999MH2007PTC175407