The second-biggest IT exporter, Infosys, said on Thursday that its consolidated net profit for the March quarter increased by 30% year over year (YoY) to Rs 7,969 crore from Rs 6,134 crore in the same period the previous year. In contrast, experts had anticipated flattish profit growth ahead of Infosys's quarterly reports. A bigger counterpart, Tata Consultancy Services, posted 9% YoY profit increase for the period.
Infosys has projected a 1–3% rise in revenue in constant currency (CC) terms for FY25. This was in contrast to the 4 - 7% growth forecast for FY24. In line with the FY24 projection, Infosys provided margin guidance of 20–22 percent.
The massive technology company headquartered in Bengaluru reported a 1.3% YoY increase in revenue to Rs 37,923 crore from Rs 37,441 crore for the quarter. Analysts had predicted a 3–4% increase in revenue. For FY24, the IT company declared a special dividend of Rs 28 per share in addition to a final dividend of Rs 20.
In constant currency terms (CCT), revenues decreased 2.2% year over year and stayed unchanged. Revenue in dollars reached $4,564 million, up 0.2% year over year. According to Infosys, its operating margin was 20.1%, a decrease of 0.4% QoQ and 0.9% YoY.
Deal Victories and Management Comments
Salil Parekh, CEO and MD, stated, "In the fiscal year 2024, we closed the largest deal ever. This illustrates how much our clients trust us. Our generative AI skills keep getting better. We are working on client programs, leveraging large language models with impact across software engineering, process optimization, and customer support."
According to Infosys, the quarter's major deal total contract value (TCV) was $4.5 billion, of which 44% was net new. This exceeded the $2–3 billion in transaction wins that experts had previously projected.
Policy for Allocating Capital
Infosys said that for the fiscal year 2023–2024, each share would get a final dividend of Rs 20. A special dividend of Rs 8 per share was also declared. In light of the interim dividend of Rs 18 per share that it declared following its second quarter results, Infosys has now declared a total dividend of Rs 46 for the year.
The Infosys board examined and adopted the capital allocation strategy for the following five years, from FY25 to FY29, during its meeting on April 18, 2024, after taking the following operational and strategic cash requirements into account.
"The Company expects to continue its policy of returning approximately 85 percent of the free cash flow cumulatively over a 5-year period through a combination of share buybacks, special dividends, and/or semi-annual dividends, subject to applicable laws and requisite approvals, if any," with effect from the financial year 2025. stated Infosys.
A Client Update regarding Financial Services
One of the major contracts in the financial services sector was renegotiated and rescoped by Infosys during Q4, which had a one-time effect of around 100 basis points. Approximately 85% of the contract's scope is still in effect.
Cash Flows free at an 11-quarter High
According to Infosys, its Q4 free cash flow (FCF) of $848 million was the highest in the previous 11 quarters due to its unwavering emphasis on improving the working capital cycle.
"The Board has approved the capital allocation policy, under which the company expects to return 85% over the next 5 years and progressively increase annual Dividend Per Share. This is consistent with the objective of giving high and predictable returns to shareholders," stated Jayesh Sanghrajka, CFO.
Underpinned by Project Maximus' early performance, he continues, "operating margin expansion in the medium-term and improving cash generation continue to remain our priorities."
