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We expected better numbers: Vishal Sikka of Infosys

Infosys Chief Executive Officer Vishal Sikka said the company’s performance in the January-March period was below his expectations for various reasons.

“It is a challenging performance,” Sikka said in a post-result press conference. “We were expecting a higher number,” said, adding that the situation in the last quarter will have some impact on the new year.

Sikka named various contributing factors for the lower-than-expected performance, including rising protectionist tendencies in the US and the overall poor appetite for IT services.

The CEO said the evolving numbers have made it more difficult to achieve the company’s target of doubling its revenue to $20 bln by 2020. “It was always a moonshot, but the numbers make it tougher to achieve,” he said.

Sikka said increasing digitization and commoditization of many of the services provided by the company — such as software testing, infrastructure maintenance and so on — contributed to the poor performance.

The CEO was among the first in the industry to warn that increasing software sophistication will rob many of India’s IT engineers of their current roles in the industry.

“We have to bring automation and artificial intelligence into everything we do.. About 35% of (our) workforce produce about 45% of the revenue at a much higher RPE (revenue per employee) in more innovative areas. We have to invest more in these areas.”

Chief Operating Office Pravin Rao said the shift of some industries to the cloud model has meant lower margins and revenues for IT services companies like Infosys.

“There is a large amount of cost take-outs and some amount of in-sourcing,” he said.

EXPANDING US OPS

The company said it has guided for a lower-than-usual margin of 23-25% keeping in mind the requirements to set up local delivery centers in the US market.

The US government is tightening the screws on letting in Indian IT engineers into the country to ‘replace’ local American workers at lower salaries.

“The role of visas has become too strong in our industry in the last 10-15 years. We have to deliver value to our clients irrespective of visas,” Sikka said, adding that there should be a ‘healthy mix’ of local and offshore talent.

Q4 NUMBERS

For the Jan-March quarter, Infosys reported $2.569 bln revenue, which was flat compared to the previous quarter.

On a year on year basis, there was a growth of 5.3%, after adjusting for currency movements.

In rupee terms, revenues were Rs 17,120 crore, down 0.9% on quarter.

Operating profit for the quarter was $634 million, down 0.9% on quarter and up 1.5% on year.

Net profit was $543 million for the quarter ended March 31, 2017, down 0.8% on quarter and up 1.8% on year.

In rupee terms, net profit was Rs 3,603 crore, down 2.8% on quarter and up 0.2% on year.

The strengthening rupee may further dent the company’s margins going forward.

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