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- 19 Apr 2024
- ICICI Securities
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INFOSYS REPORTED WEAK PERFORMANCE IN Q4FY24
News: Infosys reported weak performance in Q4FY24 as both revenue & margins came below the streets expectations. The company’s revenue declined by 2.2% QoQ in CC terms in Q4 more than expected due to renegotiation of contract (15% de-scoped) by a large client. The company reported revenue of US$ 4,564 mn, down 2.1% QoQ while in rupee terms revenue came at INR 37,923 crore, down 2.3% QoQ. Geography wise in CC terms, North America (59.6% of mix) declined by 2.2% YoY while Europe (28.6% of mix) grew by 4.9% YoY. Vertical wise Manufacturing (14.7% of mix) & Hi-Tech (8.7% of mix) grew by 8.7% & 9.7% YoY in CC terms while Financial Services (26.4% of mix) & Retail (14.3% of mix) declined by 8.5% & 3.7% YoY. EBIT margin of the company declined by 40 bps QoQ to 20.1% due to the headwind impact of 100 bps contract rescoping & renegotiation by a client & 80 bps impact of increase in salary & travel cost mitigated by tailwinds of 60 bps lower post sales customer support, 40 bps of Project Maximus & 40 bps of reversal of cyber security incident in Q3. Large deal TCV came at US$4.5 bn. For FY24 the company revenue grew by 1.4% in CC terms while in rupee terms it grew by 4.7%. The company reported an EBIT margin of 20.7%, down 40 bps compared to FY23. The company for FY25 is guiding for a revenue growth in the band of 1-3% and margin in band of 20-22%.
Views: The company reported weak performance during the quarter and also the fiscal year wherein the revenue growth came marginally below the lower end of the guidance. The company has more exposure to discretionary spending mix and delay in recovery of the same is reflected in the weak guidance of 1-3% revenue growth for FY25. The company for FY25 has guided for a margin band of 20-22% similar to last fiscal year and mentioned that it has enough scope to improve utilization, reduce subcon costs, Gen AI deployment & pricing to maintain margin. Nonetheless, it continues to reflect weaker execution and margin resilience than TCS.
Impact: Negative