Result Analysis: Infosys Limited Result Update: Q3FY23

Infosys Ltd. is the 2nd largest IT sector company being the global leader in consulting, technology, outsourcing and next-generation digital services, enabling clients to create and execute strategies for their digital transformation. It offers services to various sectors comprising BFSI, retail, energy & utilities and communication. Company services a large number of fortune 500 clients Company services a large number of fortune 500 clients which have strong balance sheet. The major revenue generating regions for Infosys are North America and Europe.


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    Stock Details
    Market Cap. (Cr.) 615961.75
    Face Value 5.00
    Equity (Cr.) 2093.04
    52 Wk. high/low 1954 / 1356
    BSE Code 500209 
    NSE Code INFY
    Book Value (Rs) 171.13
    Sector IT – Software


    Result Highlights:

    • Revenue of the company increased by 20.2% YoY and 4.9% QoQ to Rs.38,318 cr. as against the broader estimates of Rs.37,918 cr.

    • Operating profit margin for the quarter was unchanged at 21.5% QoQ and declined by 200 bps YoY.

    • Net Profit increased by 9.4% QoQ (despite current global headwinds) to Rs.6,586 cr. compared to the estimates of Rs.6480 cr.

    • Among industries Energy & Utilities grew 10.2%, Life Science grew 9.9%, Manufacturing grew 8.8%, Retail grew 5.7%, Communications grew 4.6% and Hi-Tech and Financial services grew by 4.2% and 0.8% sequentially.

    • Across geographies, only Europe grew 110 bps while North America, India and Rest of the world showed de-growth of 50 bps, 50 bps and 10bps respectively on QoQ basis.

    • Order book of Infosys is strong at $3.3 billion compared to $2.7 billion in the previous quarter.

    • Attrition rate dropped significantly from 27.1% in previous quarter of September 2022 to 24.3% in the December quarter.

    • Company added only 1,627 employees in the quarter, total headcount is at 3,46,845.

    Key Ratios
    Debt-equity: 0.08
    ROCE (%): 39.66
    ROE (%): 32.34
    EPS: 54.65
    P/BV: 8.6
    P/E: 26.92

    Financial Performance:


    Management Commentary:

    • Commenting on the December quarter results, Salil Parekh, CEO and MD said, our revenue growth was strong in the quarter, with both digital business and core services growing. We continue to gain market share as a trusted transformation and operational partner for our clients. We remain focused on helping businesses accelerate their digital agenda to uncover new value and growth, as well as improve operational and cost effectiveness.

    • Nilanjan Roy, Chief Financial Officer said, Operating margins in Q3 remained resilient due to cost optimization benefits which offset the impact of seasonal weakness in operating parameters. Attrition reduced meaningfully during the quarter and is expected to decline further in the near-term.

    Shareholding Pattern:

    Shareholding Pattern  
    Promoters & Promoter Group 13.11%
    FIIs 32.17%
    DIIs 28.00%
    Public 25.79%
    Others 0.93%


    Infosys gave strong Q3FY23 results beating the broader estimates. The energy & utilities, manufacturing and Life sciences showed 8%-10% growth QoQ. Operating margin of the company remained in-line but the guidance upgradation gives positive outlook for the FY23. Revenue from Europe grew by 110 bps in the Indian currency despite prevailing headwinds in the region. The TCV pipeline of the company gives confidence on the company’s ability to sail inefficiently going further. Infosys has delivered earnings of Rs.42.85 in last 3 quarters and we further expect to deliver earnings of Rs.57 for the FY23 at the CMP of Rs.1517 at the PE of 27x.


    Particulars (In Rs. Cr.) Q3FY23 Q2FY23 Q3FY22 QoQ % YoY%
    Revenue from Operations 38,318 36,538 31,867 4.9% 20.2%
    Other Income 769 584 512 31.7% 50.2%
    Total Income 39,087 37,122 32,379 5.3% 20.7%
    Employee Benefit Expenses 20,272 19,438 16,355 4.3% 23.9%
    Employee benefit Expenses as % of Sales 52.9% 53.2% 51.3% -30 bps 160 bps
    EBIT 8,242 7,873 7,484 4.7% 10.1%
    EBIT Margin (%) 21.5% 21.6% 23.5 -200 bps
    Profit After Tax 6,586 6,021 5,809 9.4% 13.4%
    PATM (%) 17.2% 16.5% 18.2% 70 bps -100 bps
    EPS (in Rs.) 15.72 14.35 13.86 9.5% 13.4%


    Segment Revenue (In Rs. Cr.) Q3FY23 Revenue % Q2FY23 QoQ % Q3FY22 YoY%
    Financial Services 11235 29.3% 11,148 0.8% 10,023 12.1%
    Retail 5480 14.3% 5,183 5.7% 4,612 18.8%
    Communication 4710 12.3% 4,501 4.6% 3,979 18.4%
    Energy, Utilities, Resources & Services 4957 12.9% 4,498 10.2% 3740 32.5%
    Manufacturing 5099 13.3% 4,686 8.8% 3598 41.7%
    Hi-Tech 3095 8.1% 2,971 4.2% 2567 20.6%
    Life Sciences 2695 7.0% 2,452 9.9% 2383 13.1%
    All other segments 1047 2.7% 1,099 -4.7% 965 8.5%
    Total 38,318 100.0% 36,538   31,867  


    Geography Revenue % Q3FY23 Q2FY23 Q3FY22 QoQ YoY
    North America 62.0 62.5 61.8 -50 bps 20 bps
    Europe 25.8 24.7 24.9 110 bps 90 bps
    Rest of the World 9.8 9.9 10.3 -10 bps -50 bps
    India 2.4 2.9 3.0 -50 bps -60 bps

    Conference call Highlights:

    • Strong Q3 performance with 13.7% YoY and 2.4% QoQ growth in Revenue on CC basis despite changing global economy.
    • Margins is at 21.5% flat sequentially, got benefit of 40 bps increase from currency appreciation and 70 bps increase from cost optimization.
    • LTM attrition declined by 280 bps QoQ and is expected to decline further going forward.
    • Continue to gain market share and benefit from consolidation; Large deal value is highest in eight quarters at $3.3 billion with 32 large deals out of which 36% is net new deals in the quarter.
    • CC Digital revenue growth of 22% and counts 63% of total revenue.
    • Signs of slowing global economy prevails; Mortgages, investment banking, financial services industry, telco, high-tech and retail industries are more impacted. Confident in the area of digital, cloud and automation segments.
    • Revenue growth guidance for FY23 has upgraded to 16%-16.5% from earlier guidance of 15%-16% as vendor consolidation and cost optimization provide growth opportunities further. Operating profit margin guidance for FY23 retained at 21%-22% and expect it to remain at the lower end.
    Source: Company website, EWL Research

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