BENGALURU:
1. Highlights of financial results of Infosys for the quarter and nine months ended December 31, 2017
Q3 revenues grew year-on-year by 8.0% in USD terms; 5.8% in constant currency terms; 3.0% in INR terms
Q3 revenues grew sequentially by 1.3% in INR terms; 0.8% in constant currency terms
Q3 operating margin improved to 24.3% from 24.2% in Q2 18
Q3 EPS at Rs 22.55, year-on-year growth of 39.0% and sequential growth of 38.3%
Q3 EPS of Rs 22.55 includes positive impact of Rs 6.29 from Advance Pricing Agreement (APA) with the US IRS
9 months year-on-year revenue growth at 2.1% in INR terms; 5.6% in constant currency terms
Q3 cash flow from operating activities were at Rs 4,257 crore, compared to Rs 2,831 crore in Q2 18
Utilization excluding trainees at all-time high of 84.9%
Q3 standalone attrition declined to 15.8% from 17.2% in Q2 18
FY 18 revenue guidance in constant currency retained at 5.5%-6.5%
FY 18 operating margin range unchanged at 23%-25%
Financial Highlights
Consolidated results under International Financial Reporting Standards (IFRS) for the quarter ended December 31, 2017
Revenues were Rs 17,794 crore for the quarter ended December 31, 2017
Operating profit was Rs 4,319 crore for the quarter ended December 31, 2017 QoQ growth of 1.7%; YoY decline of 0.4%
Net profit was Rs 5,129 crore for the quarter ended December 31, 2017 QoQ growth of 37.6%; YoY growth of 38.3%
Basic EPS at ` 22.55 for the quarter ended December 31, 2017
During the quarter, on account of the conclusion of an APA with the US IRS, net profit has increased which has led to an increase in Basic EPS by Rs 6.29 for the quarter
Consolidated results under International Financial Reporting Standards (IFRS) for the nine months
ended December 31, 2017
Revenues were Rs 52,439 crore for the nine months ended December 31, 2017 YoY growth of 2.1% in reported terms; 5.6% in constant currency terms
Operating profit was Rs 12,676 crore for the nine months ended December 31, 2017 YoY decline of 0.1%
Net profit was Rs 12,339 crore for the nine months ended December 31, 2017 YoY growth of 14.8%
During the nine months period ended December 31, 2017, on account of the conclusion of an APA with the US IRS, net profit has increased which has led to an increase in Basic EPS by Rs 5.81
“It is a privilege for me to be appointed as the CEO & MD of Infosys, helping our clients navigate the digital future and employees build new skills and capabilities. Our Q3 performance is strong. We had 8% year-on-year growth and 24.3% operating margin with US$ 593 million of free cash flow.” said Salil Parekh, CEO & MD.
“We are progressing towards stability and are well positioned to serve our clients in the new areas of demand” he added. “Increased adoption of our digital offerings and new services helped stabilize price realization. We were able to grow client relationships across revenue categories.” said Pravin Rao, COO. “During the quarter, we provided compensation increases and higher variable payouts to our employees. Our investments in employees continues to deliver results as reflected in lower attrition.”
“Our operating margins were stable on the back of broad-based improvement in operational efficiency parameters. Our cash generation continued to be robust during the quarter.” said M.D. Ranganath, CFO. “We successfully executed the share buyback of Rs 13,000 crores in line with our capital allocation policy.”
2. Outlook for FY 2018
The Company’s outlook (consolidated) for the fiscal year ending March 31, 2018, under IFRS is as follows:
Revenues are expected to grow 5.5%-6.5% in constant currency*;
Revenues are expected to grow 2.1%-3.1% in INR terms based on the exchange rates as of December 31, 2017**
*FY 17 constant currency rates – AUD/USD – 0.75; Euro/USD – 1.09; GBP/USD – 1.30
**Currency rates as of December 31, 2017 – 1 US $ = ` 63.88
3. Board and Management Changes
Based on the recommendations of the Nomination and Remuneration Committee, the Board in its meeting held on December 2, 2017 appointed Salil Parekh as the Chief Executive Officer and Managing Director of the Company with effect from January 2, 2018 for a period of 5 years, subject to the approval of shareholders and other regulatory requirements, if any. The Board re-designated Pravin Rao as the Chief Operating Officer and Whole Time Director with effect from January 2, 2018 upon stepping down as the interim Chief Executive Officer and Managing Director in accordance with the terms of his appointment. Further, Pravin Rao shall hold the office of Whole Time Director up to August 17, 2022.
The postal ballot notice dated January 3, 2018 seeking the approval of shareholders including the terms of appointment of the above changes is available on the Company’s website at the following link-
https://www.infosys.com/investors/Documents/postal-ballot-jan2018.pdf
Rajesh K. Murthy, President, has resigned from the company for personal reasons. His last date with Infosys will be January 31, 2018. The Board places on record its deep appreciation for his commitment to Infosys over the last 26 years and wishes him the very best for his future endeavours.
4. Committee of Directors
The Committee of Directors was formed on April 13, 2017 to support and advise the management in executing the Company’s strategy. With the appointment of Salil Parekh as the CEO and Managing Director of the Company, the Committee of Directors stands dissolved with effect from January 12, 2018.
5. Update on Shareholders consultation by SRC
The Company has completed the previously announced shareholder consultation. The feedback received was presented and taken on record by the Board on January 11, 2018
6. Signing of the Advance Pricing Agreement (“APA”) with the US Internal Revenue Service Infosys has concluded an Advance Pricing Agreement (“APA”) with the U.S. Internal Revenue Service (“IRS”). Under the APA, Infosys and the IRS have agreed on the methodology to allocate revenues and compute the taxable income of the Company’s U.S. operations. This agreement covers financial years from 2011 to 2021. The APA will enhance predictability of Infosys’ tax obligations in respect of its U.S. operations.
In accordance with the APA, Infosys has reversed tax provisions of approximately Rs 1,432 crore made in previous periods which are no longer required (both under International Financial Reporting Standards and Indian Accounting Standards). Further, in line with the APA, Infosys expects to payout approximately US$ 233 million due to the difference between the taxes payable for prior periods as per the APA and the actual taxes paid for such periods. This amount is expected to be paid over the next few quarters.
The reversal of the tax provisions of approximately Rs 1,432 crore had a positive impact on the consolidated Basic EPS for the quarter ending December 31, 2017 by approximately ` 6.29. Further, on account of the APA methodology, Infosys expects its overall effective tax rate to be lower by about 100 basis points for future periods covered under the APA.
7. Share buyback
The Board, at its meeting on August 19, 2017, approved a proposal for the Company to buyback its fully paid-up equity shares of face value of Rs 5 each from the eligible equity shareholders of the Company for an amount not exceeding ` 13,000 crore. The shareholders approved the said proposal of buyback of Equity Shares through the postal ballot that concluded on October 7, 2017. The Buyback offer comprised a purchase of 11,30,43,478 Equity Shares aggregating 4.92% of the paid-up equity share capital of the Company at a price of Rs 1,150 per Equity share. The buyback was offered to all eligible equity shareholders (including those who became equity shareholders as on the Record date by cancelling American Depository Shares and withdrawing underlying Equity shares) of he Company as on the Record Date (i.e. November 1, 2017) on a proportionate basis through the “Tender offer” route. The Company concluded the buyback procedures on December 27, 2017 and 11,30,43,478 equity shares were extinguished. The Company has funded the buyback from its securities premium and general reserve. In accordance with section 69 of the Companies Act, 2013, the Company has created ‘Capital Redemption Reserve’ of Rs 56 crore equal to the nominal value of the shares bought back as an appropriation from general reserve.
