Infosys Q4 Net Profits at Rs 3,603 Crores; Guidance Disappoints

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India's second largest software services provider, Infosys reported numbers that largely met expectations, but, its guidance disappointed.

The markets had gone into the event with no great expectations, given the tough environment that tech company's are presently operating in.

The financials

Infosys reported a consolidated net profit of Rs 3,603 crores, which was marginally better than Rs 3,550 crores that most of the analysts were expecting.

The revenues for the company came in at Rs 17,120 crores for the quarter ending March 31, 2017, which was slightly below expectations. The board of the company has recommended a final dividend of Rs 14.75 per equity share for the financial year ended March 31, 2017.

Dollar revenue at the company at $2,569 million, saw a growth of 0.7 percent over $2,551 million in the December quarter.

 

Bonanza for shareholders

The Company's current policy is to pay dividends of up to 50 per cent of post-tax profits of the Financial Year. Effective from Financial Year 2018, the Company expects to payout up to 70 per cent of the free cash flow of the corresponding Financial Year in such manner (including by way of dividend and/or share buyback) as may be decided by the Board.

The board of Infosys will now pay up to Rs 13,000 crore, to shareholders via dividend or share buyback in FY18.

 

Guidance a big disappointment

The company guided for a revenue growth of 6.5-8.5 per cent in constant currency terms. This was largely below what analysts were expecting and below the industry average. In fact, companies like Cognizant, which are now growing faster has guided a higher 8-10 per cent growth in the current calendar year 2017.

This was one reason that investors largely remained disappointed on the performance front.

Stock price under pressure

The stock price of Infosys has come under severe pressure, in the last few days ahead of the results. The share price has dropped even further today and is now trading at Rs 948, down 2 per cent over the previous close. However, this also happened immediately after the previous quarter numbers, where it fell and then recovered. The large scale distribution of cash on the books to shareholders, may help to sustain the stock price in the coming days.

Check stock quote of Infosys here

Management commentary

"Unanticipated execution challenges and distractions in a seasonally soft quarter affected our performance. At the same time, we continued to see many positive signs of our strategy execution; our software-led offerings continued to show strong momentum and client success, with continued adoption of Mana, our AI platform. Looking ahead, it is imperative that we increase our resilience to the dynamics of our environment and we  remain resolute in executing our strategy, our path to transform Infosys, and to drive long term value for all stakeholders," CEO, Vishal Sikkka said.

"In FY 17, operating margins were steady as we continued our sharp focus on operational efficiencies. Cash provided by operating activities during the year was robust and exceeded $2 billion, a new high",
said M. D. Ranganath, CFO.

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