HomeEarningsQ4 PreviewInfosys Q4 Preview: Weak financial services demand, seasonality likely to mute growth

Infosys Q4 Preview: Weak financial services demand, seasonality likely to mute growth

According to experts, Infosys, India’s second-largest information technology (IT) business, is likely to achieve modest revenue and profit growth for the March quarter due to sluggish financial services demand and seasonal factors.

The Bengaluru-based firm, which will report results on April 13, expects sales to expand by 1.4 percent and net profit to rise 0.6 percent quarter over quarter (QoQ) in the fourth quarter of FY 2023.

According to an analyst poll, Infosys’s consolidated revenue will be Rs 38,859 crore, representing a 20.4 percent year-on-year (YoY) increase. The consolidated net profit is predicted to grow 16.5 percent year on year to Rs 6,623 crore.

Analysts estimate a sales increase of 0.3 to 0.6 percent QoQ in constant currency (CC).

Bank Turmoil

Infosys, like other IT services firms that rely on banking, financial services, and insurance (BFSI) firms for a large portion of their revenue, has felt the impact of a potential banking crisis, which resulted in the failure of Santa Clara, California-based Silicon Valley Bank and the rescue of Credit Suisse by UBS in March.

According to Kotak Institutional Equities, Infosys has a 26 percent exposure to the banking and financial services industry, excluding insurance.

“Expect muted CC revenue growth of 0.6 percent QoQ due to seasonality and weakness in Financial Services; USD growth implies 110BP of currency tailwind. There is no material change in large deal momentum compared to last quarter,” securities firm Motilal Oswal wrote.

Basis points are abbreviated as BP. A basis point is one-tenth of a percentage point.

Securities companies anticipate Infosys to guide for a 6–8 percent year-on-year revenue increase in FY24.


“We expect Infosys to end the year at the upper end of its guidance of 16- 16.5 percent C/C growth and margins at the lower end of 21-22,” Asian Market Securities wrote.

Earnings before interest and tax (EBIT) are estimated to be Rs 8,395 crore, with the margin increasing by 78 basis points to 21.6 percent, according to an expert poll.

Analysts disagree on the magnitude of margin growth. IDBI Capital forecasts the EBIT margin to increase by 83 basis points (bps) year on year to 22.3 percent, owing to lower attrition.

“Despite having favourable levers towards margins such as decrease in sub-con costs (as percentage of revenue) and decrease in attrition, pricing and pyramid optimisation among others and the headwinds such as flattish growth, increase in travel levels (not to pre-COVID levels), investment in sales side is expected to be more pronounced this time, thereby leading to flattish to muted growth in margin on QoQ basis,” according to analysts at B&K Securities.

Analysts will be paying particular attention to management comments on client IT budget allocations, overall contract value in the deal pipeline and recent deal wins, discretionary expenditure reduction, and the margin forecast.

Furthermore, what Infosys says about attrition patterns, the forecast for the telecom, retail, BFSI, and hi-tech sectors, and the recent re-allocation of Mohit Joshi’s portfolios and responsibilities will be closely monitored. Joshi stepped down as president of Infosys in March.

Disclaimer: The views and investment tips expressed by experts on Business Headline are their own and not those of the website or its management. Business Headline advises users to check with certified experts before taking any investment decisions.

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