Infosys Q4 FY16 earnings: Six things to watch out for

Infosys registered stellar growth and beat street estimates during the past three quarters. The last quarter of the financial year offers an opportunity to end the year on a strong note.

Apr 15, 2016 08:04 IST India Infoline News Service Tejal Shringarpure |

Infosys registered stellar growth and beat street estimates during the past three quarters. The last quarter of the financial year offers an opportunity to end the year on a strong note.

Given below are six things to look out for when the IT bellwether announces its Q4 and annual results on April 15.

Revenue growth and profit margins: The second largest IT firm of the country is likely to rake in a net revenue of Rs.16,602 crore, which would constitute a rise of 3.8% yoy and 4.4% qoq, according to IIFL estimates. The operating profit margin (OPM) is estimated to be at 27.7%, with a rise of 50 bps qoq. However, IIFL estimates a drop of 11 bps in OPM on a yoy basis.

Infosys is likely to register a net profit of Rs. 3,555 crore, which would mark an increase of 14.8% yoy and 2.6% qoq.

Revenue guidance: The company is likely to revise its revenue target to ~16% for FY17. Infosys is said to have set a higher target at the recently concluded Strategic and Action Planning Meet (Strap) held in its Mysore campus.

Constant Currency: Infosys’s constant currency (cc) dollar revenue growth in FY16 could surpass the upper end of its guidance of 12.8‐13%. It is expecting 2‐2.5% cc qoq growth in Q4 FY16, which is quite plausible given the impressive outcome from the new strategy in terms of improving wallet share and deal signings.

Focus on automation and Zero Bench initiative: The Zero Bench initiative is a key cog of Infosys' larger vision pertaining to automation and futuristic technologies. The initiative places the company on an aggressive path towards achieving the $20 billion revenue target by 2020. Vishal Sikka has strategically employed about 70% of the people as bench strength thus far, with at least one project in the Zero Bench programme. The IT major managed to free up over 1,100 people in the third quarter of FY16 using these technologies. “Automation will drive up margins, while enabling companies to use fewer employees,” Sikka said during a recent investors summit.

Services: The company witnessed softness in the energy, aerospace, oil and gas, and retail sectors in Q3. However, it has seen good traction in auto services; the financial services business is considered its brightest star.

Large deals and deal pipeline: The tech giant has secured at least 10 large deal wins with a total contract value of more than $50 million during this period. The deal wins include deals from Deutsche Bank, Mercedes-Benz, and the Goods and Services Tax Network (GSTN) in India. CEO Vishal Sikka recently said that the firm's recent track record in winning large contracts is the best in its 35-year history, mentioning that the company has outperformed for the first time in many years. “Our deal wins have improved dramatically and we're approaching $800-900 million a quarter in large deals,” Sikka was quoted as saying. While announcing Q3 results, Infosys said that it is currently working on an order worth $600 mn. The overall deal pipeline of the second largest IT firm stands at $300 billion.

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