Infosys hits fresh record high; m-cap crosses Rs 6-trillion mark

Shares of Infosys hit a fresh record high of Rs 1,425 after rising nearly 3 per cent on the BSE in intra-day trade on Monday, which propelled the company's market capitalisation (market-cap) beyond Rs 6 trillion mark. The stock surpassed its previous high of Rs 1,406.25, touched on March 16, 2021.

At 10:01 am, Infosys was trading 2 per cent higher at Rs 1,411.80, with a market-cap of Rs 6.01 trillion, the BSE data shows. In comparison, the S&P BSE Sensex was down 2 per cent or 1,030 points at 48,999. In the past two months, Infosys has outperformed the market by surging 12 per cent, against 3 per cent decline in the benchmark index.

Infosys, last month, informed the stock exchanges that a meeting of the board of directors of the company will be held on April 13 & 14, 2021, to approval and take on record the audited consolidated financial results of the Company and its subsidiaries for the quarter and year ending March 31, 2021 (Q4FY21).

Acceleration in digital technologies, improved demand post Covid-19, ramp up of previous deal wins and migration to cloud are driving revenues of IT companies. Hence, analysts expect IT companies to report healthy Q4FY21E revenues.

“We believe improved traction in BFSI, retail, manufacturing, hi tech and life-science will drive revenues in the quarter. This, coupled with cross currency tailwind, will further boost revenue growth in the quarter. Further, IT companies are also seeing a demand tailwind in terms of cost takeout by clients (led by higher offshoring & automation), vendor consolidation opportunities, lift & shift deals and traction in small & medium deals, which could further propel demand in coming quarters,” ICICI Securities said in IT sector result preview.

The brokerage firm expects Infosys to report 4.5 per cent quarter on quarter (QoQ) increase in revenues in constant currency terms mainly led by traction in cloud migration, ramp up of deal wins and Vanguard deal. The company is also witnessing a healthy deal pipeline led by lift & shift deals, acceleration in digital technologies and cost take out deals.

With cross currency tailwind, we expect dollar revenues to increase 5.3 per cent QoQ. However, we expect margins to decline 132 bps QoQ due to wage hikes, higher travel & facility cost partially offset by automation and offshoring. The profit after tax (PAT) is expected to increase 22 per cent year on year (YoY) due to low base and savings in travel & facility cost, it said.

The brokerage firm Nomura expects Infosys to report 3.2 per cent QoQ constant currency (CC) and 3.8 per cent QoQ USD growth in Q4 led by the ramp-up in deals won in Q3 (highest-ever TCV of USD7.13 billion with around 73 per cent net-new) and continued momentum across verticals (excluding Energy where the outlook remains weak).

We expect sequential EBIT margin dip of 130bps led by full-quarter impact of wage hikes (typically ~150bps impact) and rising attrition levels. Deal win momentum is likely to be tepid after strong Q3 and lower than usual deal announcements. The brokerage firm expects Infosys to guide for USD revenue growth of 12-14 per cent and earnings before interest and tax (EBIT) margins of 22-24 per cent for FY22F (we build in USD revenue growth of 16 per cent and EBIT margins of 23.4 per cent for FY22F), it said.