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Published: Apr 18, 2023
Updated: Apr 18, 2023

Indian IT Giants Face Setbacks as Infosys Q4 Results Fall Short of Expectations

Infosys, India's second-largest information technology firm, recently announced its consolidated net profit of Rs 6,128 crore for the quarter ending March 2023. Despite the 7.8% YoY increase, the company's Q4FY23 results failed to meet market expectations, resulting in a sharp decline in Indian IT stocks. Infosys shares fell over 10% on Monday, as the consolidated revenue came in at Rs 37,441 crore, up 16% against Rs 32,276 crore in the previous year, but 3.6% lower than the estimated Rs 38,830 crore.

Revenue Growth and Operating Profit for Infosys in Q4

Infosys posted operating profit of Rs 7,877 crore in Q4FY23, up 13% from the previous year. However, the operating margin contracted 0.5% yearly and sequentially to 21%. The company's revenue grew by 8.8% YoY during the fourth quarter at a constant currency rate and 15.4% for the entire fiscal year. The North American region remained the key driver of revenue, accounting for 61% of it, followed by Europe at 27%, rest of the world at 9.4%, and India at 2.6%.

Attrition Rate and Employee Count at Infosys

The company's attrition rate dropped to 20.9% during the fourth quarter, compared to 24.3% in the previous quarter. The total employee count as of March 31 stood at 3,43,234, marking a drop of 3,611 employees from the previous quarter. Infosys CEO and MD Salil Parekh said that the company is investing in its people and is focusing on digital, cloud, and automation capabilities to support its clients.

Large Deals Closed and Dividend Announcement

The total value of large deals closed in Q4FY23 stood at $2.1 billion, with a total value of $9.8 billion for the entire fiscal year. The company's board has recommended a final dividend of Rs 17.50 per equity share for the fiscal year, with a total dividend of Rs 34 per share, 9.7% higher than the previous year.

TCS also Disappoints with Lower-than-Expected Q4 Results

A day earlier, IT sector bellwether TCS also disappointed with lower-than-expected numbers for the last quarter of FY23. TCS reported a 14.8% YoY increase in consolidated net profit at Rs 11,392 crore, with consolidated revenue from operations coming in at Rs 59,162 crore, up 16.9% from the year-ago quarter.

Impact of the Q4 Results on Indian IT Stocks

The below-expectation Q4 results of Infosys and TCS have negatively impacted Indian IT stocks, with Infosys shares falling over 10% on Monday. The companies' EBIT margin contracted YoY, and their operating margins fell sequentially, leading to a significant decline in their stock prices.

IT industry now focuses on retaining clients and maintaining guidance

The Q4 results of Infosys and TCS have highlighted the challenges faced by the Indian IT industry in the wake of the COVID-19 pandemic. While the companies' revenue growth and operating profit have increased YoY, their below-expectation results have resulted in a significant decline in their stock prices. The industry is now faced with the challenge of adapting to changing market conditions and enhancing its capabilities to meet the evolving needs of its clients.