Infosys Limited is an Indian multinational information technology company provides consulting, technology, outsourcing and next-generation digital services to enable clients to execute strategies for their digital transformation. The company was founded in Pune and is headquartered in Bangalore. Infosys is the second-largest Indian IT company and the 602nd largest public company in the world, according to the Forbes Global 2000 ranking.
Quarterly Growth Walkthrough
Infosys has reported a 13 percent growth in its consolidated net profit for the third quarter of the current fiscal which ended on 31st December 2022 at Rs 6,586 crore. The company had reported a net profit of Rs 5,809 crore in the corresponding quarter of the previous fiscal year.
The company’s consolidated revenue from operations has risen by an astounding 20 percent to Rs 38,318 crore as compared to Rs 31,867 crore in the corresponding quarter of the previous fiscal year.
Overall, the third quarter performance was a brilliant display of vitality in revenue, guidance and acquisition of new deals as well as enhancement of the affairs in supply. Infy is poised to propel transformation with digital and cloud solutions along with optimization of cost by means of automation and consolidation through vendors.
Undeterred by a seasonally weak quarter due to holidays and furloughs, the company has produced a sturdy 2.4 percent sequential growth in revenue in constant currency. The year-on-year (YoY) growth in revenue in constant currency of the first nine months was 18 percent for the current fiscal year. The Digital segment contributed to about 63 percent of the total revenues which has also grown by 22 percent in constant currency.
Revenue by Geography
The management has been wary of Europe due to the prevailing conflict in Ukraine but the growth remains unaffected (+25% YoY). The growth in North America which consists of 62 percent of the total market share has given a great output of growth (+10.5% YoY). The contribution from the rest of the world was rigid (+12% YoY). The Indian growth in India has diminished and underperformed (-5% YoY).
Performance of business segments
The industries of Energy & Utilities (+26% YoY), Manufacturing (+37% YoY) and Life-sciences (+5% YoY) have shown enhancement; however, the arms of Banking Financial Services and Insurance (BFSI) namely mortgages and investment banking (5.5% YoY), followed by hi-tech (+10% YoY), retail and telecom (13% YoY) have shown underperformance.
Deal acquisitions
The company has made announcements of 32 large deals which are historically the highest for the company with a total contract value of $3.3 billion as compared to $2.7 billion in the previous quarter. The new deal acquisitions contributed 36 percent of the total contract value. Infy continues its momentum in gaining a bigger market share through trades in digital transformation and adoption of cloud technologies. Due to a tough macro environment, the company is prioritising on to optimization of cost and enhancement of efficacy. Infy’s abilities in automation is an epic advantage.
Active clients at the end of December have risen by 4 percent to 1,850 sequentially and 6.4 percent YoY.
The company has acquired 17 clients in the $1 million+ category, 13 clients in the $10 million+ category and two clients in the $50 million+ category. It lost one client in the $100 million+ category.
Workforce and Attrition
Infosys had 346,845 employees at the end of December versus 345,218 at the end of September. The number of female employees as a percentage of the total was at 39 percent.
The CFO of Infosys said in a statement that the attrition rate has gradually reduced during the third quarter with an expectation of an additional decline in the coming months. The attrition rate was at 24.3 percent for the third quarter which has reduced from 27.1 percent sequentially and 25.5 percent YoY.
Capital Deployment
Infosys has initiated shares buy back by the open market method from 7th December 2022 and will pursue the process until 6th June 2023. The company has bought back 31.3 million shares worth Rs 4,790 crore (51.5 percent of the total authorisation of Rs 9,300 crore) at an average price of about Rs 1,531 per share, which is significantly lower than the maximum buyback price of Rs 1,850 per share.
Technical Analysis
Infy stock price has taken support at the 38.2% retracement level thrice and faces resistance at the 23.6% retracement level. We expect a breakout over this level and the gap filling is the target at Rs 1748 which is marked by the yellow box. The stock may rise to its lifetime high around the price range of Rs 1950 and we can be hopeful for a breakout over its lifetime high which is backed by the healthy growth of the company. Accumulation of Infy stock at current level is satisfactory however a deeper correction may not occur unless the price breaks below the 38.2% retracement level. Hence entry at price of Rs 1400 is a good investment for adding Infy to the portfolio. Investors should be prudent through patience to make large investments into Infosys on deep corrections.
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