The much awaited financial results of Infosys for the fourth quarter, and the first full quarter for Salil Parekh as its new CEO and managing director, did not have major surprises. Analysts, however, found the guidance to be little lower than expected. They felt it should have been a percentage or two higher in tune with the revised outlook by Nasscom and companies like Accenture. Sudheer Guntupalli, analyst at Ambit Capital for instance felt there were no major surprises in the numbers and that they were more or less in tune with the expectations though the guidance numbers were a bit lower, which even he thought could be a reflection of the new management philosophy on guidance.
Infosys FY19 revenue guidance in constant currency is at 6 per cent to 8 per cent and the operating margin range is at 22 to 24 per cent. However, many felt, the relatively muted outlook and like Guntupalli attributed some of it to a conservative guidance philosophy of the new Infosys leadership. If this marks a return to the good old days of Infosys then the founders should have reasons to feel happy. The major news point in the results was the decision by the company to sell Panaya, the company that was acquired earlier by Infosys and events around it seen as a reason for the undoing of the Vishal Sikka administration. The company CFO M D Ranganath however seem to put across a rather surgical and operational approach to the subject and said the company has initiated identification and evaluation of potential buyers for its subsidiaries, Kallidus and Skava (together referred to as "Skava") and Panaya (collectively referred to as the "disposal group"). The company anticipates completion of the sale by March 2019 and accordingly, assets amounting to Rs 2,060 crore ($316 million) and liabilities amounting to Rs 324 crore ($50 million) in respect of the disposal group have been reclassified and presented as "held for sale". On reclassification, an impairment loss of Rs 118 crore ($18 million) in respect of Panaya has been recognized in the consolidated profit and loss for the quarter and year ended March 31, 2018. The corresponding write down in the investment value of Panaya in the standalone financial statements of Infosys Ltd. is Rs 589 crore ($90 million).
Ranganath, however, said, the sale was part of an overall review of the portfolio, given that the company has over 40 subsidiaries. He made an important observation about the buyback and said "during the year, the company implemented the capital allocation policy including the successful closure of $2 billion share buyback program in December 2017 and a healthy increase in dividend per share for the year. On the margin guidance, he said, it "reflects our emphasis on digital-led growth and focused investment in this journey."
COO Pravin Rao had some good news for the employees: "Revenue productivity per employee was stable during the year as the benefits of automation and newer services kicked in. Employee utilization remained healthy." He also said: "During the quarter, we provided highest level of variable payouts in several years. We will be rolling out compensation increases for a large part of our workforce effective April 1st."
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Highlights of financial results for the quarter and year ended March 31, 2018