Infosys expects IT budgets in BFSI vertical to improve

Infosys expects IT budgets in BFSI vertical to improve

Infosys has delivered a subdued performance with its revenue growing by 1% q-o-q (0.8% q-o-q in CC terms) to $2,755 million in 3QFY18, which is a seasonally weak quarter. Its EBIT margin expanded by 10 bps q-o-q, owing to improved operational efficiency and higher utilisation. While volume grew by a decent 1.6% q-o-q, blended billing rate declined by 0.7% q-o-q. From vertical perspective, BFSI continued to remain under stress with revenue growing by a meagre 0.1% q-o-q. However, within BFSI, the insurance sub-vertical clocked a healthy 7.3% q-o-q growth in dollar revenue, while pressure is clearly seen more on the BFS sub-vertical, which declined by 2.6% q-o-q. On a positive note, revenue from retail & CPG grew by 3.2% q-o-q, while revenue from transport & logistics increased by 6% q-o-q. Energy & Utilities vertical also grew by a healthy 6.5% q-o-q, marking the third successive quarter of >6% growth. On the flip side, revenue from life sciences and healthcare verticals declined by 3.2% and 4.1%, respectively. The management reiterated its CC revenue growth guidance at 5.5-6.5% for FY18E. Geo-wise, north America grew by 0.7% q-o-q, while Europe clocked a strong 6.2% q-o-q growth in dollar terms.

Despite a subdued quarterly performance, the management has alluded to an improvement in IT spending environment in CY18. Infosys expects IT budgets in the key BFSI vertical to improve following rise in discretionary spend especially owing to initiatives like digitization, AI and Automation. In retail and CPG vertical, new opportunity conversions have been strong particularly in CPG. On an industry-wide basis, Infosys believes the deal pipeline continues to remain strong, though decision making cycle still remains elongated, ranging from 6-9 months. From other operating metric perspective, Infosys added a gross of >12,600 employees in 3QFY18, while the net headcount addition stood at 3,251, taking the total employee base past the 200,000-mark (201,691). Employee utilisation touched its highest-ever levels, with ex-trainee utilisation rising to 84.9% (84.7%) and cum-trainee utilisation rising to 82.1% (81.8%).