“Infosys management believes its higher exposure to discretionary work (digital business, which formed ~65% of revenue) has been a key reason behind tepid revenue growth in the current environment,” said a Global Markets Research report on Infosys by Nomura.
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Nomura presented the report highlighting key takeaways from investor meeting with the Infosys management in February.
In the nine month period in FY24 from April to December, Infosys won $13 billion in deals.
Citing the strong deal wins, the Infosys management also defended questions around senior leadership attrition hurting growth prospects of the company.
“Infosys noted that it has a deep bench of senior leadership in the company. Of the 90+ SVP and EVPs in the company, ~50% have been with Infosys for more than 20 years and 30% have been with the company for more than 25 years.
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It pointed out that all the roles of the recent senior leadership departures have been filled internally (Jayesh Sanghrajka replaced Nilanjan Roy as CFO, Dennis Gada replaced Mohit Joshi as BFSI head, and Ravi Kumar’s role of deputy COO was filled by two internal candidates of ~30 years).“Client relationships are not hurt as there has been no client loss, and business relationships have strengthened further..,” it added.
The Bengaluru-based IT services provider noted that clients are still finalising their budgets for CY24E, and the company’s revenue growth guidance for FY25E will factor in those conversations.
During the third quarter results announcement, Infosys projected to end the FY24 with revenue growth of 1.5-2% against its previous guidance of 1-2.5% it had projected in October 2023.
For the October to December quarter, the IT giant posted a revenue growth of 1% year-on-year (YoY) to Rs 38,821 crore, while in constant currency terms, the revenues declined 1% from a year ago.
In dollar terms, its revenue were down $4.66 billion in revenue for the December quarter, down 1% sequentially as well as YoY.
Calling demand as a “tale of two halves”, the Nomura note said projects with immediate cost-savings remains strong and discretionary demand remains weak as focus is on projects with immediate return on investment.
“While clients have not given up transformation agendas, they await some stability in macroeconomic conditions to restart their paused programs,” it added.
The Nomura note also pointed out Infosys commentary that Infosys has around 120 live projects in Gen AI but most are small and experimental. Further, clients are “cautious while spending on GenAI given issues around data privacy, ethics, compliance and legal aspects and limited clarity on benefits”.
