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Infosys Results: HDFC Securities expects 70 basis points expansion in margins

Updated : October 16, 2018 12:15 PM IST

Infosys, India’s second largest software services provider, will report its second-quarter earnings after market hours on Tuesday.

Sharing his views and expectations with regards to the IT major's numbers, Apurva Prasad of HDFC Securities, said, “Margins are likely to expand for the quarter. We expect 70 basis points (bps) expansion on a sequential basis. I think there is an upside risk to the guided band of 22-24 percent, maybe 50-100 bps, it is just that it has not been a while since the management lowered it in order to make greater investments onsite but let us not forget, those were pegged at a very different dollar-rupee rates. So I think there is an upside risk to the margin guidance, so that is one thing to look out for."

One basis point is a hundredth of a percentage point.

Prasad expects Infosys to maintain FY19 constant currency(CC) revenue growth at 6-8 percent.

“I don’t think the full year growth 6-8 percent CC would be altered, although I am expecting numbers to be at the top-end of that guidance. So there is an upside risk, so let us not forget that BFSI there was some traction coming back in the previous quarter, so if you look at the deal wins, a large percentage of those deals were coming from BFSI in excess of 40 percent. There seems to be some traction there,” he said.

“Overall deal trajectory looks to be pretty healthy. From 700-800 million on a quarterly basis, it has inched up to about 1.1 billion, so that trajectory is certainly encouraging,” Prasad added.

“30-35 percent growth in digital can be pegged in case of Infosys. I will be positively surprised if the guidance is up. I am not expecting guidance to be increased so far. What I need to hear more is on the attrition side because if you see the attrition differential between the two companies, it is probably at a peak right now. So including from what I understand, the high performance attrition levels of the company that needs to probably normalise,” he further mentioned.
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