Infosys on Friday kicked off the new financial year on a strong note, even as rival Tata Consultancy Services (TCS) reported a soft quarter.
Not only has the company bumped up its revenue guidance for the full financial year, it has also decided to distribute 85 per cent of free cash-flows to shareholders through dividends and buybacks over a period of five years against 70 per cent earlier. Analysts believe that the June quarter’s performance should drive up consensus estimates for the full year.
The company bumped up its guidance for the fiscal to 8.5-10 per cent from 7.5-9.5 per cent, on the back of its strong performance. The company’s net profit increased 5.3 per cent on a year-on-year basis, while it declined 6.8 per cent sequentially to Rs 3,802 crore. Revenues for the quarter ended June 2019 grew by 14 per cent year-on-year and 1.2 per cent sequentially to Rs 21,803 crore. In constant currency, revenues rose 12.4 per cent y-o-y and 2.8 per cent sequentially. The company has also signed large deals worth $2.7 billion, which is the highest so far. The company had exited FY19 with total contract value of $6.28 billion.
Operating profit declined 1.5 per cent y-o-y and 3.2 per cent q-o-q to Rs 4,471 crore. Operating margin was 20.5 per cent. Digital revenues — which now account for 35.7 per cent of total sales — grew by 41.9 per cent y-o-y and 8.6 per cent sequentially.
While the firm exited June quarter with operating margins at 20.5 per cent, the management has maintained that for the full year the margin guidance at 21-23 per cent. Commenting on the company’s performance during the quarter, Infosys CEO and MD Salil Parekh said, “We had a strong start to FY20 with constant currency growth accelerating to 12.4 per cent on year-on-year basis and digital revenue growth of 41.9 per cent. This was achieved through our consistent client focus and investments, which have strengthened our client relationships. Consequently, we are raising our revenue guidance for the year”.
Effective from FY20, the company expects to return approximately 85 per cent of free cash flows cumulatively over a five-year period through dividends, share buybacks or special dividends. Infosys CFO Nilanjan Roy said, “Continuing our objective of improving shareholder returns, we have revised our capital allocation policy upwards to distribute 85 per cent of free cash flows cumulatively over a 5-year period”. FE