IT majors upbeat on demand outlook with former lifting full-year revenue forecast, latter saying ‘bullish’ on growth
Infosys Ltd. on Wednesday reported third-quarter net profit climbed 16.6% to ₹ 5,197 crore buoyed by large deal wins and gathering demand for enabling digital transformation. The upbeat outlook also spurred the country’s second-largest information technology services provider to raise its revenue guidance for the financial year ending in March for the second straight quarter.
And smaller rival Wipro Ltd. Reported third-quarter profit jumped 20.8% to ₹ 2,968 crore, boosted by the strongest sequential IT services revenue growth in 36 quarters – of 3.9%. Chief Executive Officer Thierry Delaporte said the company was ‘bullish’ on revenue growth adding, “the demand environment is steadily improving, especially for digital transformation, digital operations, and cloud services”.
Infosys said it expects revenue to grow by 4.5-5% in the financial year ending March 2021, faster than the 2-3% pace it had projected earlier. The company also raised its operating margin guidance to 24-24.5%, from 23-24%.
“Execution of client relevant strategy focused on digital transformation continues to drive superior growth, well ahead of the industry,” said CEO and MD Salil Parekh. “The scale of new client partnerships with leading global companies such as Vanguard, Daimler and Rolls-Royce demonstrate the depth of digital and cloud capabilities of Infosys,” he added.
India’s IT firms have benefited from a global trend to add digital offerings and leverage cloud capabilities as the pandemic has made businesses across sectors to realize the strategic need to bolster remote services both for internal work and for customers.
Infosys reported total contract value for large deals in the quarter touched an all-time high of $ 7.13 billion, with 73% being net new business. Among the several deals it bagged were a cloud partnership with German automaker Daimler AG and a strategic partnership with British aero-engine maker Rolls-Royce.
Revenue grew 12.3% to ₹ 25,927 crore. Operating margin at 25.4%, surged 350 basis points from the year-earlier quarter. The firm said it would hire 24,000 more staff from campuses, adding that voluntary attrition rate at its IT services business slid to 10%, from 15.8% a year earlier. The cash flow during the quarter grew 19.4% to ₹ 5,683 crore.
Infosys COO Pravin Rao said the company would adopt a hybrid model of work from home and office going forward. “We have to wait and watch on real estate rationalization. We are not renewing many offices on rent. We have slowed down on infrastructure expansion, ”he added.
“Infosys reported another solid quarter beating the revenue and margin performance, along with record-high deal wins,” said Sanjeev Hota, head of research at Sharekhan. “Strong revenue growth was driven by market share gains and ramp-up in deals,” he added.
Wipro said growth had been broad-based, across sectors and markets. Revenue from operations grew 1.3% to ₹ 15,670 crore, while IT services revenue grew 3.9% from the preceding quarter to $ 2,071 million.
“We expanded our operating margins during the quarter by about 240 bps to 21.7%,” Mr. Delaporte said. “This again is the highest we have achieved in the last 22 quarters,” he added.
Wipro said its new organizational structure, which came into effect on January 1, had made the company more robust, strategic, focused, and determined.
So far, the transition had been smooth without many disruptions and the full realization of the corporate and business change would start showing up in the next couple of quarters, the company added.
“We closed our largest ever deal win in Continental Europe,” the CEO said. “We have moved into our new organization structure and are stabilizing quickly,” he elaborated.
For the quarter ending March 31, Wipro expects revenue from its IT services business to be in the range of $ 2,102 million to $ 2,143million, a sequential growth of 1.5% to 3.5%.
Wipro said it had begun to make investments in its frontline sales and domain experts. For 80% of its employees, the company had completed the promotion cycle effective December 1, and would also be rolling out salary increases for them effective January 1.
Saurabh Govil, president and chief human resources officer, said the hiring outlook looked ‘very robust’ for the next quarter and beyond. The company would hire across geographies, segments and markets, he said.
“We have a robust hiring plan, across the board for freshers, laterals and senior staff,” said Mr. Govil.
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