Infosys disappoints market

Infosys posted a very muted and lower-than-expected Q4FY24 earnings and the guidance too was pretty low-key. This disappointed the market and the stock is today in the red, going down 3% to an intraday low at Rs.1379.70 and is now trading at Rs.1399 levels. Its 52-week low is at Rs.1215.45.

The company, for FY24 delivered a 1.4% growth in revenue at $18.6 billion in constant currency and operating margin of 20.7%.

Free Cash Flow was strong at $2,882 million, an increase of 13.7% over FY 23.

Large deal TCV for FY24 was highest ever at $17.7 billion, with 52% being net new.

Q4 revenues were at $4,564 million, flat YoY and down 2% QoQ constant currency. Large deal TCV for the quarter was $4.5 billion, with 44% being net new. Operating margin for the quarter was 20.1%, a sequential decrease of 40 bps. Free Cash Flow was at $848 million.

The earnings were impacted by 100 basis points one-time headwind from renegotiation of a BFSI contract and lower revenue growth from its biggest region – North America.

For FY24, the Board recommended a final dividend of Rs.20/share and additionally a special dividend of Rs.8/share. With this, the total payout over FY20 – FY 24 was 85% of Free Cash Flow – their set objective for capital allocation.

The company’s Board, effective from  current fiscal, FY25, approved continuing with its policy of returning approximately 85% of the free cash flow cumulatively over a 5-year period through a combination of semi-annual dividends and/or share buyback/ special dividends subject to applicable laws and requisite approvals, if any. Under this policy, the company expects to progressively increase its annual Dividend Per Share (excluding special dividend if any).

Though Q4 numbers missed targets they were way-off and too skewed. More than the earnings, what really disappointed the markets were the muted guidance – one its slowest growth guidance ever given at the beginning of a new fiscal. It expects its revenue to grow 1-3% in constant currency terms in FY25 v/s growth of 4-7% guided at the beginning of FY24 and 1.5-2% at end of Dec’24 for FY24.