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Coronavirus outbreak: Infosys says pandemic may impact profitability as global markets hit

The clients in the major IT markets could cut costs hitting its cash flows, Bengaluru-based IT services exporter also said in the filing with the US Securities and Exchange Commission

twitter-logoBusinessToday.In | May 31, 2020 | Updated 15:26 IST
Coronavirus outbreak: Infosys says pandemic may impact profitability as global markets hit
IT major Infosys

Infosys has said that the coronavirus crisis is expected to hit its profitability on account of the negative impact on economies of the United States (US), European Union (EU) and other key markets. The clients in the major IT markets could cut costs hitting its cash flows, Bengaluru-based IT services exporter also said in the filing with the US Securities and Exchange Commission on May 29. There are also chances of delay and suspension of some existing services projects, it noted.

"Our profitability may be negatively impacted if we are unable to eliminate fixed or committed costs in line with reduced demand. Additionally, any sudden change in demand may impact utilisation in the short term thereby impacting margins. Our profitability may be marginally impacted as some clients may dispute some of the existing work-in-process that has been recognised by us as unbilled revenues. This, in turn, can impact our cash flows negatively," Infosys said.

"The uncertainty in demand as our clients deal with a prolonged economic impact of COVID-19 may cause us to implement severe cost control measures including a reduction in employee bonuses. This could result in increased attrition of employees and/or a higher expenditure on recruitment and subcontracting services, thereby impacting our profitability. If the market price of our shares/ADS remains low due to a prolonged recession, the value of RSUs and the ability to achieve the performance targets of the PSUs we have given to our employees may reduce. This will impede our ability to retain our high performing employees," it added.

Infosys also informed that chief executive officer (CEO) Salil Parekh's total remuneration has increased by 27 per cent to $6.15 million in FY20. Infosys had earlier said that considering business uncertainty amid the coronavirus pandemic, it is unable to currently provide guidance on revenues and margins for the ongoing fiscal. It will provide guidance after visibility improves, it had also said in its earnings report for the quarter ended March.

Meanwhile, Infosys posted a 6.10 per cent jump in consolidated profit for the March quarter at Rs 4,321 crore compared with Rs 4,074 crore in the same quarter last year.  Revenue for the quarter rose 8 per cent to Rs 23,267 crore.

Also read: Lockdown 5.0: Fifth phase of coronavirus lockdown from June 1, all you need to know about unlock 1.0

Also read: CBDT notifies Income Tax Return forms for FY 2020-21; check details here

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