Infosys ' first quarter (April-June) profit is likely to fall 4.2 percent sequentially to Rs 3,447 crore due to weak operational performance while revenue growth may be continued, similar to same quarter last year. Earnings will be announced on July 15. Revenue in Q1 is expected to grow 3.25 percent to Rs 17,089 crore and dollar revenue may increase 4.1 percent to USD 2,547 million compared with preceding quarter, according to average of estimates of analysts polled by CNBC-TV18. Overall, it is expected to be a good quarter for the company. Dollar revenue growth is likely to be supported by currency tailwinds of 50-60 basis points, hence constant currency growth may be around 3.5 percent for the quarter. Earnings before interest & tax (EBIT) is seen declining 3.4 percent quarter-on-quarter to Rs 4,076 crore and margin may contract by 165 basis points to 23.85 percent on partial wage hike and visa costs. Analysts feel the country's second largest IT company is likely to maintain its overall FY17 guidance. After its Q4FY16 earnings, the company had said constant currency revenue growth was expected at 11.5-13.5 percent, which is higher than NASSCOM's industry guidance of 10-12 percent, and dollar revenue growth at 11.8-13.8 percent for FY17, which can be impacted by exchange rate moves. Rupee revenue growth was estimated at 12.7-14.7 percent and margin at 24-26 percent (against 25 percent in FY16) for the financial year. Key things to watch out for: Brexit The management's outlook was largely positive at the beginning of the year, but now the Brexit can keep the sentiment cautious for some time. Management's comments on this would be important, although it may still be early for them to gauge the impact as Brexit happened at the end of June.
Analysts feel Infosys is expected to be least impacted due to Brexit as UK has 7 percent exposure to its revenue. Management's commentary during the quarter caused some nervousness with Infosys warning of softer growth in healthcare and life sciences. This was the fastest growing vertical at 24 percent in FY16. Key reason is impact of patent cliff, mergers & acquisitions and weak drug pipeline, the company said. Deal wins The company is targeting to achieve quarterly total contract value (TCV) of USD 1 billion. In Q4FY16, TCV was at USD 757 million and FY16 quarterly average was also around USD 700 million. Analysts feel a continuation of the recent large deal win trend into H1 is likely to secure revenue guidance for the year. Attrition Attrition in Q1FY15 was at 26.4 percent, which has been reduced to 17.3 percent in Q4FY16. According to analysts, Infosys has a few additional headwinds in FY17 - rise in depreciation charge, potentially higher variable compensation as against 75-80 percent in FY16 and normalisation of provisions. However, this can be offset by automation gains. Infosys saved 1,700 people effort in the March 2016 quarter partly led by automation and 4,000 in FY16, though this is too small to meaningfully contribute to margins, say analysts.
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