Infosys cuts guidance for FY18, absolves Sikka of wrongdoing

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Infosys said its Q2 revenues grew sequentially by 2.9% in USD terms and 2.2% in constant currency terms.

It said for the year, revenues are expected to grow 5.5%-6.5% in constant currency, which is lower than its previous guidance.

Three months ago, it had maintained sales growth guidance at 6.5-8.5% on a constant-currency basis for the ongoing financial year.

Now, revenue in dollar terms is expected to grow 6.5%-7.5% based on current exchange rates.

QUARTERLY RESULTS

In rupee terms, revenues were Rs 17,567 crore for the quarter ended September, up 2.9% sequentially and 1.5% on year. The rupee number was hit by the relatively strong Indian currency versus the dollar.

Operating profit was Rs 4,246 crore, a decline of 1.4% on year, but higher by 3.3% sequentially.

Net profit was Rs 3,726 crore, up 7.0% on quarter and 3.4% on year.

Q2 operating margin were at 24.2%, as compared to 24.1% in Q1.

“We continue to focus on executing on the theme of software enabled services and on accelerating growth of our new services portfolio.” said U B Pravin Rao, Interim CEO and Managing Director.

“During the quarter, we responded quickly to the management and Board changes through proactive communication with all stakeholders minimizing any negative impact to the business and allowing us to deliver growth across all our large industry units.”

“Our focus on improving operational efficiencies enabled us to deliver stable margins in the quarter and at the same time provide compensation increases and higher variable payouts to our employees.” said M. D. Ranganath, CFO. “We have taken several steps during the quarter towards our capital allocation policy covering `13,000 crore share buyback, coupled with interim dividend of `13 per share for enhancing shareholder returns.”

It also said its Chairman conducted a review of all the external investigations into certain anonymous complaints the Company had previously received.

“The review covered a range of matters described below, including the acquisition of Panaya which was completed by the Company in February 2015 and the severance payments to the former CFO.

“After careful consideration led by our Chairman, the Board reaffirms the previous findings of external investigations that there is no merit to the allegations of wrongdoing,” it said.

Nilekani, Chairman of the Board, said. “I believe that all stakeholders acted out of a strong passion for Infosys, wanting what they believed to be the best for the Company and to see it succeed. In light of my review of these matters, I am fully persuaded, as is the entire Board, that the conclusions of the independent investigations are correct. This Board and I are committed to the highest standards of professionalism and will deal promptly and decisively with any governance issues should they ever come up in the future.”

The company also said severance payments to the Company’s former CFO “could have been better handled.

“The Company has identified opportunities for improvements in processes and practices, which have been implemented.

“While the disclosures in this regard were timely, based on the feedback received, the Company has since December 2016 adopted a practice of disclosing the severance payment to key managerial personnel (“KMP”) at the time of their departure, making the disclosures sooner than required,” it said.

Infosys also added that it has globally benchmarked its severance pay and revised its senior management employment contracts.

INVESTIGATIONS

It reiterated that external investigations on Murthy’s allegations were comprehensive and robust.

“The investigation conducted by Gibson, Dunn & Crutcher and Control Risks, neither of whom had any prior dealings with Infosys, also included a review of the previous two investigations conducted by Cyril Amarchand Mangaldas…

“Among other things, the review reaffirmed the conclusion of the independent investigation that there was no merit to the allegations of wrongdoing with respect to the acquisition of Panaya.

“The review also confirmed that the Company made appropriate and timely disclosures relating to severance payments to the former CFO at the end of the quarter of his resignation, and subsequently in the Company’s 20-F and Annual Report,” it said.

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