Infosys shares soar 15% over strong Q1 results

As per reports, Infosys added Rs 50,000 crore to investor wealth as the stock soared to a 52-week high of Rs 952 on BSE.
Infosys shares soar 15% over strong Q1 results
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The shares of IT major Infosys soared by as much as 15% on Thursday after the company posted better than expected earnings for the first quarter of FY21. On Wednesday, Infosys announced that its net profit grew 12% Rs 4,233 crore for the April-June quarter and that it secured deals worth $1.74 billion during the quarter.

Having performed better than its peers TCS and Wipro, the shares of Infosys hit 52-week highs of Rs 952 on the Bombay Stock Exchange on Thursday. As per reports, Infosys added Rs 50,000 crore to investor wealth and its market capitalisation soared. On the National Stock Exchange too, the stock rose sharply by 14.98% to a 52-week high of Rs 955.50.

As of 2 50 pm, the stock was trading at Rs 903.60, up 8.68% on BSE.

Announcing the results on Wednesday, the company management exuded confidence, claiming that they saw a great quarter, and also reinstated revenue guidance for the year. CEO and MD Salil Parekh said that they expect the company’s revenue to grow by 0-2% for FY21. The guidance for its operating margins, Infosys said, would be between 21-23% for the financial year.

The company had suspended guidance last quarter citing uncertainties brought about by the coronavirus pandemic.

“Our Q1 results, especially growth, are a clear testimony to the relevance of our service offerings and deep understanding of clients’ business priorities which is resonating with them in these times. It also demonstrates the remarkable dedication of our employees and leadership during this period,” Parekh said. “Our confidence and visibility for the rest of the year is improving driven by our Q1 performance and large deal wins.”

The depreciation of the rupee against the dollar benefited the company too.

Infosys also said that the recent presidential proclamation in the US suspending issuance of non-immigrant work visas, including the H-1B – which IT companies apply for in large numbers – wouldn’t impact the company in the short term.

“In the short term, we do not see any impact because there’s anyway a ban on travel. But our focus on localisation has really helped us. More than 60% employees are visa independent,” Pravin Rao, COO of Infosys said.

“Even in the medium to long term, we do not see an impact although personally we do feel it does not make sense. Even unemployment is very low in the tech sector. From Infosys’ point of view, given our localisation, we are fairly comfortable,” he added.

The company also said that it put in place several cost cutting measures, which helped the company’s margins.

Nilanjan Roy, CFO of Infosys said that cost cutting measures included promotion freezes and reskilling of existing employees, among others.

He also said that due to the pandemic, work travel and visa costs came down significantly, along with the company cutting down on discretionary spends like branding and marketing with aggressive rate negotiations.

Brokerages too, gave the company a thumbs up, thanks to the large deal signs and expansion of margins.

JP Morgan raised Infosys’ target price to Rs 1,000 rupees from 900 rupees, while Edelweiss has upgraded its target price on Infosys to Rs 1,080, from Rs 950.

Motilal Oswal too, increased its target price on the IT major to Rs 1,050, saying that it expects the company to further expand margins as investment stabilise. 

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