Partner With Us NRI
Infosys Ltd>
  • CMP : 1,654.7 Chg : -19.20 (-1.15%)
  • Target : 1,600.0 (15.27%)
  • Target Period : 12 Month

15 Apr 2023

Unplanned ramp down impacts growth; FY24 guidance widened to accommodate uncertainties…

About The Stock

Infosys Ltd (Infy) is one of the leading IT players catering to BFSI, retail, communication, manufacturing & hi tech verticals.

  • The company generates >62% of revenues from digital technologies
  • Dividend payout (>80%), margins (>20%) and RoCE (>31%) key positives
Q4FY23 Results:

Infosys reported weak revenue numbers in Q4FY23.

  • Revenue declined 3.2% QoQ and grew 8.8% YoY in CC terms
  • EBIT margins declined 50 bps QoQ to 21%
  • Signed 17 large deals with TCV of US$2.1 bn, down 36.4% QoQ
What should Investors do?

Infy’s share price has grown by ~2.5x over the past five years (from ~₹ 564 in April 2018 to ~₹ 1,388 levels in April 2023).

  • We maintain BUY rating on the stock
Target Price and Valuation

We value Infosys at ₹ 1,600 i.e., 22x P/E on FY25E EPS.

Key Triggers for future price performance
  • Differentiated digital and cloud capabilities to drive growth
  • Growth remained broad-based and deal momentum robust, with digital transformation rapidly getting scaled up across verticals and regions
  • Infosys to post rupee revenue growth of 10.3% CAGR in FY23-25E
  • Double-digit return ratios, strong cash generation and healthy payout
Alternate Stock Idea:

Besides Infosys, in our IT coverage we also like TCS.

  • Strong organic growth, consistent financials, industry leading margins and healthy capital allocation policy prompt us to be positive on the stock


  • BUY with a target price of ₹ 3,720

Key Financial Summary

Particulars FY20 FY21 FY22 FY23 5 year CAGR (FY18-23) FY24E FY25E 2 year CAGR (FY23-25E)
Net Sales 90,791.0 100,472.0 121,641.0 146,767.0 15.8 157,081.3 178,637.1 10.3
EBITDA 22,268.0 27,890.0 31,491.0 35,131.0 13.1 37,071.2 43,051.5 10.7
EBITDA Margins (%) 24.5 27.8 25.9 23.9 - 23.6 24.1 -
Net Profit 16,595.0 19,351.0 22,012.0 24,095.0 10.5 26,713.1 30,276.2 12.1
EPS (|) 38.9 45.6 51.9 57.6 - 64.5 73.1 -
P/E 35.7 30.4 26.8 23.9 - 21.5 19.0 -
RoNW (%) 25.2 25.2 29.1 31.8 - 32.5 33.4 -
RoCE (%) 30.8 31.7 35.8 38.5 - 37.8 39.3 -
Source: Company, ICICI Direct Research

Key takeaways of recent quarter & conference call highlights

  • Infosys reported weak numbers on the revenue front as its revenue during the quarter declined 3.2% QoQ & grew 8.8% YoY in CC terms. In dollar terms, revenue was down 2.3% QoQ & up 6.4% YoY to US$4,554 mn while in rupee terms it reported revenue of | 37,441 crore, down 2.3% QoQ & 16% YoY
  • Digital revenues (62.9% of mix) declined 2.3% QoQ to US$2,864 mn while Core revenues (37.1% of revenue mix) declined 2.3% QoQ also. In CC terms, Digital revenue grew 15% YoY while core revenue declined 0.2%
  • Geography wise (in CC terms YoY), North America (61% of mix) reported single digit growth of 6% while Europe (27% of mix) reported growth of 20.3%
  • Vertical wise (in CC terms YoY), financial services vertical (28.9% of mix) reported growth of just 0.4% due to unexpected ramp down in pockets of mortgage, investment banking & asset management. The company also mentioned that its total exposure to regional banks is less than 2% of overall revenue of the company. Manufacturing vertical grew 26.5% while Energy & Utilities, Life sciences, Retail, Hitech & communications reported growth of 17.1%, 15.7%, 12.6%, 3.7% & 0.3%, respectively
  • EBIT margin of the company declined 50 bps QoQ to 21% while the company indicated the following headwinds for decline in margins: 1) 70 bps impact of decline in utilisation & ii) -90 bps impact of one-time revenue loss due to cancellation of projects during the quarter mitigated by the tailwinds of i) +50 bps due to cost optimisation & lower subcontractor cost & ii) +60 bps on post sale customer support
  • For FY23, the company reported revenue of US$18,212 mn, up 11.7% while in CC terms the growth was 15.4%. In rupee terms, revenues came in at
    | 146,767 crore, up 20.7%. On the EBIT margin front, Infosys reported margin of 21.1% for FY23 compared to 23% in FY22
  • The company, during the quarter, won 17 large deals with a TCV of US$2.1 bn, down 36.4% QoQ and 8.7% YoY. The company also indicated that net new deals contributed ~21% of TCV in Q4. Infosys further said that its deal pipeline remains robust and its pipeline includes several mega deals. The company also indicated that several of the deals in the pipeline are cost optimisation and vendor consolidation. Infosys also mentioned that in FY23 it won large TCV of US$9.8 bn with a net new TCV of US$3.9 bn (39.8% of TCV, 95 large deals)


  • The 17 large deals won by the company were across the following segments: i) five in manufacturing; ii) four in financial services, iii) three each in communications, iv) two each in lifescience & hi-tech and v) one in energy & utilities while geography wise the split was: i) 10 in US & ii) seven in Europe


  • The company indicated that it is leveraging generative AI capability for clients as well as within the company. It has active programs going on to address specific need of the clients. Infosys mentioned that it expects more opportunities to come up in this space, which is also likely to improve productivity withing the company


  • The company indicated that the demand environment has changed in Q4 compared to last quarter wherein it witnessed unplanned ramp down by clients and delays in decision making, which resulted in lower volumes (demand softness) and subsequently in revenue decline. There was also a one-time impact on the revenue for the quarter (pertains to some project cancellations). The company indicated that it witnessed some stability in March but the demand scenario is quite dynamic and uncertain


  • The company indicated that its large deal pipeline remains robust, which also contains certain mega deals. It mentioned that several of these opportunities are cost take out programs and consolidation projects. The company indicated that certain industries like financial services, investment banking, telecom, hi-tech, retail are more impacted due to uncertainty and delays in decision making. The company also mentioned that US region is more impacted than Europe region. Infosys mentioned that keeping uncertainty in mind, it continues to focus on cost optimisation programs to work on its pyramid, onsite-offshore ratio, travel, subcontractors, office consolidation and pricing and it expects this to build up the path for margin expansion in the future


  • Infosys indicated that growth in FY23 was mixed in H1 and H2 wherein H1 resorted 20% growth while in H2, the growth was slower at 11% (which was a reflection of change of demand environment)


  • The company completed the open market share buyback on February 13, at an average price of ~| 1,539 per share (compared to maximum buyback price of | 1,850 per share). Consequently, the share capital of the company has reduced by 1.44%. Including the recently concluded buyback and final dividend for FY23, the company has returned ~86% of free cash flow to shareholders under the current capital allocation policy


  • The company mentioned that recent issues in US regional banks are likely to have a minimal impact on BFSI vertical as exposure to regional banks is less than 2% of overall revenues. Retail sector continued its investments in digital transformation to accelerate revenue maximisation with budget spend in the right areas to increase RoI while some pressure is visible in discretionary spend. Hence, focus areas are e-commerce platform, supply chain management, customer engagement tools. Manufacturing continues to ramp up large deals and some vendor consolidation benefit is coming here while investment continued in the areas of ER&D, industrial IoT and 5G. Europe manufacturing is having some impact of high energy prices, increase in interest rates as well as supply chain disruption. Communication sector is witnessing pressure on increase in opex, ramp downs and delayed decision making. Energy, utilities continued strong performance on large deal wins


  • For margins the company is guiding for an EBIT margin of 20-22% for FY24. The company mentioned that margin guidance factored in growth assumptions for FY24, annual wage hikes in FY24, some normalisation of costs like travel & facilities etc, impact of utilisations etc


  • On pricing, the company mentioned that it is been working on three initiatives in the last 18 months to improve its pricing: i) the company indicated that it in the last 12 months it has curbed down on the renewal discount, which it was earlier offering, which is expected to improve realisation ii) the company has adopted a new digital pricing method for new deals, which takes into consideration different methods like cost based pricing, outcome based pricing, etc. to make innovative contract with customers & iii) negotiate with clients to include cost of living adjustment (COLA) clause to the MSA agreements with clients, which will provide opportunity to negotiate pricing with the client in the future


  • The company mentioned that after recent exit of two senior leaders including the one in financial services segment, it is planning to roll out a new structure for the BFSI vertical. The company mentioned that it has strong internal leadership pool and some of them are likely to step up to take bigger responsibilities


  • On the M&A front, the company announced that it has a strong balance sheet to do small, medium or large acquisition as the current market is conducive for inorganic opportunities. Infosys, however, confirmed that its revenue guidance growth for FY24 is organic and does not include incremental revenue coming in from acquisitions





  • The company’s net employee count during the quarter declined by 3,611 bringing the total headcount to 343,234. Utilisation of the company declined for a sixth consecutive quarter and in Q4 utilisation declined 170 bps QoQ to 80% due to a decline in volumes. The company indicated that utilisation will improve in the coming quarters as freshers become billable, which will also aid in pyramid optimisation. On the hiring outlook for FY24 the company did not give any hiring target and indicated it will rationalise its hiring as per the available pool of resources & demand


  • Attrition of the company continues to decline and in Q4 its LTM attrition declined sharply by 340 bps QoQ to 20.9%. The company further informed that its quarterly attrition declined ~400 bps while its quarterly attrition is below pre-Covid levels


  • Infosys declared a final dividend of | 17.5 per share in Q4 taking the total dividend for FY23 to | 34 per share, up 9.7%
Variance Analysis
   Q4FY23   Q4FY23E   Q4FY22   YoY (%)   Q3FY23   QoQ (%)   Comments 
Revenue 37,441 38,900 32,276 16.0 38,318 -2.3 Revenue growth was impacted due to unexpected ramp down by clients, projects cancellation and one time impact
Employee expenses 24,890 25,502 21,382 16.4 25,436 -2.1  
Gross Profit 12,551 13,398 10,894 15.2 12,882 -2.6  
Gross margin (%) 33.5 34.4 33.8 -23 bps 33.6 -10 bps  
Selling & marketing costs 1,659 1,782 1,347 23.2 1,611 3.0  
G&A expenses 1,894 2,218 1,701 11.3 1,904 -0.5  
EBITDA 8,998 9,398 7,846 14.7 9,367 -3.9  
EBITDA Margin (%) 24.0 24.2 24.3 -28 bps 24.4 -41 bps  
Depreciation 1,121 1,148 890 26.0 1,125 -0.4  
EBIT 7,877 8,250 6,956 13.2 8,242 -4.4  
EBIT Margin (%) 21.0 21.2 21.6 -51 bps 21.5 -47 bps EBIT margin declined due to the following headwinds: i) -70 bps drop in utilization & ii) -90 bps impact of one time impact of revenue decline mitigated by the tailwinds of i) +50 bps cost optimization & lower subcon cost & ii) +60 bps benefit on post sale customer support 
Other income 589 700 587 0.3 689 -14.5  
PBT 8,466 8,950 7,543 12.2 8,931 -5.2  
Tax paid 2,332 2,372 1,848 26.2 2,345 -0.6  
Reported PAT 6,128 6,578 5,686 7.8 6,586 -7.0  



I/We, Sameer Pardikar, MBA, Sujay Chavan, MMS, Research Analysts, authors and the names subscribed to this report, hereby certify that all of the views expressed in this research report accurately reflect our views about the subject issuer(s) or securities. We also certify that no part of our compensation was, is, or will be directly or indirectly related to the specific recommendation(s) or view(s) in this report. It is also confirmed that above mentioned Analysts of this report have not received any compensation from the companies mentioned in the report in the preceding twelve months and do not serve as an officer, director or employee of the companies mentioned in the report.

Terms & conditions and other disclosures:

ICICI Securities Limited (ICICI Securities) is a full-service, integrated investment banking and is, inter alia, engaged in the business of stock brokering and distribution of financial products.

ICICI Securities is Sebi registered stock broker, merchant banker, investment adviser, portfolio manager and Research Analyst. ICICI Securities is registered with Insurance Regulatory Development Authority of India Limited (IRDAI) as a composite corporate agent and with PFRDA as a Point of Presence. ICICI Securities Limited Research Analyst SEBI Registration Number – INH000000990. ICICI Securities Limited SEBI Registration is INZ000183631 for stock broker. ICICI Securities is a subsidiary of ICICI Bank which is India’s largest private sector bank and has its various subsidiaries engaged in businesses of housing finance, asset management, life insurance, general insurance, venture capital fund management, etc. (“associates”), the details in respect of which are available on www.icicibank.com.


ICICI Securities is one of the leading merchant bankers/ underwriters of securities and participate in virtually all securities trading markets in India. We and our associates might have investment banking and other business relationship with a significant percentage of companies covered by our Investment Research Department. ICICI Securities and its analysts, persons reporting to analysts and their relatives are generally prohibited from maintaining a financial interest in the securities or derivatives of any companies that the analysts cover.


Recommendation in reports based on technical and derivative analysis centre on studying charts of a stocks price movement, outstanding positions, trading volume etc as opposed to focusing on a companys fundamentals and, as such, may not match with the recommendation in fundamental reports. Investors may visit icicidirect.com to view the Fundamental and Technical Research Reports.


Our proprietary trading and investment businesses may make investment decisions that are inconsistent with the recommendations expressed herein.


ICICI Securities Limited has two independent equity research groups: Institutional Research and Retail Research. This report has been prepared by the Retail Research. The views and opinions expressed in this document may or may not match or may be contrary with the views, estimates, rating, and target price of the Institutional Research.


The information and opinions in this report have been prepared by ICICI Securities and are subject to change without any notice. The report and information contained herein is strictly confidential and meant solely for the selected recipient and may not be altered in any way, transmitted to, copied or distributed, in part or in whole, to any other person or to the media or reproduced in any form, without prior written consent of ICICI Securities. While we would endeavour to update the information herein on a reasonable basis, ICICI Securities is under no obligation to update or keep the information current. Also, there may be regulatory, compliance or other reasons that may prevent ICICI Securities from doing so. Non-rated securities indicate that rating on a particular security has been suspended temporarily and such suspension is in compliance with applicable regulations and/or ICICI Securities policies, in circumstances where ICICI Securities might be acting in an advisory capacity to this company, or in certain other circumstances.


This report is based on information obtained from public sources and sources believed to be reliable, but no independent verification has been made nor is its accuracy or completeness guaranteed. This report and information herein is solely for informational purpose and shall not be used or considered as an offer document or solicitation of offer to buy or sell or subscribe for securities or other financial instruments. Though disseminated to all the customers simultaneously, not all customers may receive this report at the same time. ICICI Securities will not treat recipients as customers by virtue of their receiving this report. Nothing in this report constitutes investment, legal, accounting and tax advice or a representation that any investment or strategy is suitable or appropriate to your specific circumstances. The securities discussed and opinions expressed in this report may not be suitable for all investors, who must make their own investment decisions, based on their own investment objectives, financial positions and needs of specific recipient. This may not be taken in substitution for the exercise of independent judgment by any recipient. The recipient should independently evaluate the investment risks. The value and return on investment may vary because of changes in interest rates, foreign exchange rates or any other reason. ICICI Securities accepts no liabilities whatsoever for any loss or damage of any kind arising out of the use of this report. Past performance is not necessarily a guide to future performance. Investors are advised to see Risk Disclosure Document to understand the risks associated before investing in the securities markets. Actual results may differ materially from those set forth in projections. Forward-looking statements are not predictions and may be subject to change without notice.


ICICI Securities or its associates might have managed or co-managed public offering of securities for the subject company or might have been mandated by the subject company for any other assignment in the past twelve months.


ICICI Securities or its associates might have received any compensation from the companies mentioned in the report during the period preceding twelve months from the date of this report for services in respect of managing or co-managing public offerings, corporate finance, investment banking or merchant banking, brokerage services or other advisory service in a merger or specific transaction.


ICICI Securities or its associates might have received any compensation for products or services other than investment banking or merchant banking or brokerage services from the companies mentioned in the report in the past twelve months.


ICICI Securities encourages independence in research report preparation and strives to minimize conflict in preparation of research report. ICICI Securities or its associates or its analysts did not receive any compensation or other benefits from the companies mentioned in the report or third party in connection with preparation of the research report. Accordingly, neither ICICI Securities nor Research Analysts and their relatives have any material conflict of interest at the time of publication of this report.


Compensation of our Research Analysts is not based on any specific merchant banking, investment banking or brokerage service transactions.


ICICI Securities or its subsidiaries collectively or Research Analysts or their relatives do not own 1% or more of the equity securities of the Company mentioned in the report as of the last day of the month preceding the publication of the research report.


Since associates of ICICI Securities and ICICI Securities as a entity are engaged in various financial service businesses, they might have financial interests or actual/beneficial ownership of one percent or more or other material conflict of interest various companies including the subject company/companies mentioned in this report.


ICICI Securities may have issued other reports that are inconsistent with and reach different conclusion from the information presented in this report.


Neither the Research Analysts nor ICICI Securities have been engaged in market making activity for the companies mentioned in the report.


We submit that no material disciplinary action has been taken on ICICI Securities by any Regulatory Authority impacting Equity Research Analysis activities.


This report is not directed or intended for distribution to, or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction, where such distribution, publication, availability or use would be contrary to law, regulation or which would subject ICICI Securities and affiliates to any registration or licensing requirement within such jurisdiction. The securities described herein may or may not be eligible for sale in all jurisdictions or to certain category of investors. Persons in whose possession this document may come are required to inform themselves of and to observe such restriction.



ICICI Direct endeavours to provide objective opinions and recommendations. ICICI Direct assigns ratings to its stocks according to their notional target price vs. current market price and then categorizes them as Buy, Hold, Reduce and Sell. The performance horizon is two years unless specified and the notional target price is defined as the analysts valuation for a stock

Buy: >15%

Hold: -5% to 15%;

Reduce: -15% to -5%;

Sell: <-15% 

Pankaj Pandey

Head – Research




ICICI Direct Research Desk,

ICICI Securities Limited,

1st Floor, Akruti Trade Centre,

Road No 7, MIDC,

Andheri (East)

Mumbai – 400 093




Read More