Infosys’ margins slid by 2.2 % in Q2 following slowdown in European markets

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Salil Parekh, CEO, Infosys

Growing concerns over Brexit among European companies and a visible weakness in the banking and financial services industry has dragged the margins of global IT firm Infosys by a mere 2.2 percent during the quarter ended September 2019.

The Bengaluru-headquartered software services provider posted a net profit of $563 million during the second quarter of the Indian financial year 2020 (March-April) against a net profit of $571 million in the year-ago period. However, the margins reported were well within the market estimates.

The company’s revenues increased by 9.8 per cent at $3.1 billion in the July-September quarter as against $2.9 billion in the same period last year on the back of growth coming from its digital products and services offerings. India’s second-largest software exporter has a forecast of 9-10 percent range for fiscal FY20.  Over 80 per cent of the company’s revenue comes from its clients in North America and Europe.

“Our performance was robust on multiple dimensions – revenue growth, digital growth, operating margins, operational efficiencies, large deal signings and reduction in attrition,” said Salil Parekh, chief executive officer and managing director. “All these are clear signs that we are progressing well in our journey of client-centricity and maximizing value for our stakeholders,” he added.

The company said that its digital revenues, as a percentage of the total revenues, stood at 38 percent in the Q2 of FY 20, up from 32 percent in the same period last year. It also bagged some large deals during the quarter. As per the company’s data, Infosys won four new $100 million + deals and three $50 million worth deals. However, bulk of the new deals were in the range of $1 million-$10 million thus indicating that bigger deal pipeline remained soft.

“Q2 witnessed another quarter of all-round growth in industry segments and geographies which is a testimony to our strong credentials and client relevance. Large deal wins were $2.8 billion,” said Pravin Rao, chief operating officer.

Some of the big deals included–Toyota Material Handling North America (TMHNA) for a cloud-based IoT telematics product implementation along with application support and development for its SAP Platform. It also became a development partner for TMHNA Global Telematics Solution (GTS), an industry-leading cloud-based IoT offering, Infosys is enabling remote monitoring and diagnostic capabilities including vehicle access control, system maintenance, condition sensing and location tracking.

On BSFI segment, it has been selected as a strategic partner by Movement Mortgage, a fast-growing mortgage bank in the U.S., to lead its digital transformation and accelerate growth.

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