New services & software segregated in Q1; will be key growth driver: Vishal Sikka


Image result for New services & software segregated in Q1; will be key growth driver: Vishal SikkaIT giant Infosys beat analysts’ expectations on earnings front in the quarter ended June 2017.

To discuss the quarterly performance and the outlook going forward CNBC-TV18 spoke to Vishal Sikka, MD & CEO, Pravin Rao, COO & MD Ranganath, CFO of Infosys.

Below is an excerpt of the interview:

Q:  Will FY18 be better than FY17?

Sikka: We had a wonderful Q1. I am proud of our team’s execution in this quarter. It was broad based both in terms of strong operational performance. We started the quarter resolved to focus on execution and to not be distracted to focus on all aspects of the business. So I am proud of the result that we have seen. Obviously the revenue growth of 3.2 percent on reported basis, 2.7 on constant currency is a great start to the year and good margin performance; we did 24.1 percent despite many headwinds on the margin side. The revenue per employee has grown in six consecutive quarters and now it is approaching USD 52,000, so we are demonstrating the way in some sense in the industry in that important category, but what I am proud of is our very strong growth in new services and new software and that continues to be the driver for the future. We have separated that out and started to report that separately starting this quarter and the new services, six new areas; 8.3 percent of our revenue came from there and these are services that did not exist two years ago. So that means that if you look at our overall revenue growth in the last two year, half of that has come from services that did not exist little more than two years ago. So that is something I am quite happy about.

Q: Tell us about banking, financial services and insurance (BFSI) segment’s performance in the quarter gone by?

Rao: When you look at BFSI, our performance is on expected lines and we believe we have a dominant position in that space, we have captured a lot of market share in the last few quarters. So, we are fairly optimistic about that space. We are doing well in Europe and rest of the world. America is where we are hopeful that the spend will start, we will see some pickup in the spend in the second half. But we have to wait and see.

Q: I know you do not want to give a timeline on when the capital allocation will happen, but explain to me the process now. You have already got the necessary board approvals, what are the regulatory approvals that are needed? Is there an issue with respect to clarifications that have been sought? What is the reason for the lack of clarity on when and which quarter in FY18?

Ranganath: There is a lot of clarity on what is the capital allocation policy. We clearly said how much of the cash on the balance sheet as of today, we say upto Rs 13,000 crore will be returned to the shareholders. There is also clarity on how much of future cash flow will be returned to the shareholders. We have again up to 70 percent of the cash flow. There has been a lot of clarity and predictability in that. As I said earlier, as we are a globally listed company with large global shareholder base, we need approvals from multiple regulators, which to finalise the mechanism in which this would happen and we are hopeful that we will close it in a timely manner.