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5 key takeaways from Infosys numbers

India's second largest software services exporter Infosys Ltd declared its numbers. Bourses were so disappointed that investors punished it by wiping out more than $4 billion in the company's market capitalisation, as its shares fell by nearly 10 per cent.

twitter-logo Venkatesha Babu        Last Updated: July 15, 2016  | 13:51 IST

Venkatesha Babu, Deputy Editor, Business Today
India's second largest software services exporter Infosys Ltd declared its numbers. Bourses were so disappointed that investors punished it by wiping out more than $4 billion in the company's market capitalisation, as its shares fell by nearly 10 per cent.

 

Here are five key takeaways from today's results

1.    Growth & Guidance: From street expectations of nearly 4 per cent plus sequential growth, Infy delivered 1.7 per cent. On top of it, the company cut growth guidance by a full 100 basis points (one basis point is one hundredth of 1 per cent). In constant currency it is now saying that it will grow between 10.5 and 12 per cent versus 11.5 to 13.5 per cent it had guided earlier.

2.    Margins: In the past the company has prided itself on protecting margins and thus it has got a premium compared to peers on the exchanges. This quarter margin contracted by 138 basis points to 24.12 per cent. Clearly the company is facing pricing pressures.

3.    Attrition: Annualised attrition at the company stood at 21 per cent compared to 17.3 per cent in the previous quarter. While the management tried to explain it away as something seasonal, it seemed to be worried enough to announce restricted stock grants to a section of employees, in order to retain talent.

4.    Key Departures: While a few individuals leaving a company with an employee base of 1.97 lakh is unlikely to have significant impact, the fact that it has happened at senior levels is worrisome. Infosys was plagued by high turnover in C-Suite before Sikka's arrival as the CEO. The departure of one of his handpicked lieutenants Samson David who led the crucial AI (Artificial Intelligence) offering of the company should be cause for concern along with other senior departures. More so as David was a veteran at the company.

5.    Management Commentary: Just about a month ago, COO Pravin Rao had reiterated to analysts the company's growth numbers. What changed in a month for the company to deliver underwhelming numbers is something which the market will be wondering. While management commentary continued to be upbeat about medium to long-term goals, markets might start discounting some of those statements.

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