BANGALORE: Infosys expects choppy revenue growth in the near-term despite improvement in the IT demand environment. The management has indicated that the challenges to growth were more internal rather than external and it would take time for the firm to absorb recent organizational changes. “Third and fourth quarters are seasonally weak quarters due to the holiday season. Ongoing cost rationalization, impact on revenues from recent internal changes and consolidation of Lodestone into consulting and system integration would have an impact on its near-term revenue growth,” wrote Ashwin Mehra and Pinku Pappan of equity research firm Nomura.
The company said that margin upsides would be witnessed in the medium-term. The recent wage hikes and pricing correction may not allow the company to recoup the earlier levels of margins. Infosys chairman NR Narayana Murthy has taken a step back into the traditional space refocusing on the commoditised business even if it meant reducing its margins. The company wants to improve its margins by improving productivity by increasing offshore revenue mix and reducing onsite costs by right sizing role ratios.
Also, the company is making investments in the business to increase its margin profile. “Infosys needs more sustained order booking before turning positive on growth, as the past four quarter deal wins of $2 billion is not sufficient, according to the management,” wrote the analysts.
The company said it would look into its cash policy at the end of the calendar year. “However, the immigration bill and the acquisition policy of the company will also influence its decision. Cash figures lower in the list,” they added.
The company has seen a significant uptick in deals in infrastructure management services (IMS) and has won end-to-end deals in the space. In the past, it was focussed only on remote infrastructure management services, which was the reason why this segment underperformed compared to other peers.
