Infosys Ltd Q3 FY23 Earnings Conference Call Insights

Key highlights from Infosys Ltd (INFY) Q3 FY23 Earnings Concall

Management Update:

• [00:02:10] INFY had record-breaking 32 large deals in 3Q23 worth $3.3 billion, the highest deal value in eight quarters. The company added that this is the largest number of large deals in company’s history, with 36% of this being net new.

• [00:04:36] Voluntary quarterly annualized attrition decreased 6 percentage points sequentially in 3Q23 and is now below 20%; lowest attrition in past seven quarters.  

• [00:05:52] INFY said it’s retaining its operating margin guidance for FY23 at 21-22% and anticipate it to be at the lower end of the range.

Q&A Highlights:

• [00:15:21] Bryan Bergin from Cowen asked if there is a material change in client’s behaviour now vs. 2Q23. Salil Parekh CEO replied that INFY is seeing an impact from the economic environment on some clients in financial services, telecom, hi-tech, retail and some impact in banking. However, said that it still has strong outlooks for clients in energy, utilities, and manufacturing.

• [00:18:27] Apurva Prasad of HDFC Securities enquired about the visibility for the year ahead like pipeline or pipeline to TCV conversion. Salil Parekh CEO answered that INFY has a very strong large deal pipeline based on what’s seen in the deal flow.

• [00:22:56] Mukul Garg with Motilal Oswal asked if INFY can break-out the amount of strong TCV wins in 3Q due to share gains versus resilient technology spend. Salil Parekh CEO said that the large deal momentum is based on the digital transformation and cost efficiency automation deals. It’s a broad portfolio, so when clients feel the impact of the economic environment, INFY has the cost efficiency play to support them.

• [00:30:40] Moshe Katri from Wedbush Securities asked that considering the March guidance upgrade being unusual, if INFY can share any views on the budget cycle, and any potential delays or slippages and if budgets will be finalized on time. Salil Parekh CEO said on budget, INFY don’t see a broad base change. It’s somewhat different a bit by industry or sub industry.

• [00:35:33] Pankaj Kapoor with CLSA queried about the win and pipeline of smaller deals, less than INR50 million TCV, how it’s been moving. Salil Parekh CEO answered that INFY doesn’t typically disclose much about those deals. Overall INFY said it has a healthy pipeline.

• [00:36:09] Pankaj Kapoor with CLSA asked about the pricing behavior in the cost takeout deals. Salil Parekh CEO replied that the pricing in 3Q23 has been stable.

• [00:39:00] Ankur Rudra of J.P. Morgan asked if the company is worried that the US business is slower than Europe. Salil Parekh CEO answered that INFY had strong growth in the US at over 10% in 3Q23. In Europe, it’s impacted on the economic side, but the traction on the pipeline is good.

• [00:40:36] Ankur Rudra of J.P. Morgan enquired about the trend of pricing and contract profitability in large big deals signed in 3Q23 vs. before. Nilanjan Roy CFO answered that there isn’t anything unusual. Initial part of these new deals will be lower than portfolio margins, but nothing unusual.

• [00:48:04] Rahul Jain from Dolat Capital asked about the driver of manufacturing vertical doing well in Europe, up 60% YoY. Salil Parekh CEO answered that within the industry, INFY doesn’t typically comment on a client, but the company has good traction within the European business in manufacturing.

• [00:48:56] Rahul Jain from Dolat Capital queried about digital revenue being slowest and if it’s worrying. Salil Parekh CEO said it’s due to the changes in industries and sub industries. There is more attention to the economic environment. There the digital transformation is slower and more focus on the cost and automation claims.

• [00:51:56] Girish Pai from Nirmal Bang Equities asked that from a competitive landscape, on the vendor consolidation deals, who are losing out. Salil Parekh CEO answered that INFY cannot comment on from where it’s getting the benefit of consolidation specifically, but benefits are seen coming through with large clients.