BENGALURU: Infosys’s revenue growth in the second quarter came in way better than that of rivals TCS and Wipro, encouraging it to announce salary increases and promotions across all employee levels from January.
India’s second largest software services company will also give 100% variable pay and a special incentive to junior employees for the second quarter. Salary increases are normally given with effect from April, but the pandemic and resulting business uncertainty forced the company, as also its peers, to freeze hikes and promotions.
“The quantum of increase in salary will be identical to the previous year,” chief operating officer Pravin Rao said. The company had increased salaries by an average of 6% last year.
TCS too had said last week that all its employees would be given a salary increase from October.
For the third straight quarter, Infosys’ growth rate was better than TCS’s. In constant currency, the growth was 2.2% compared to the same period last year. TCS and Wipro both saw revenue falling in Q2 – the former by 3% and the latter by 3.4%.
On a reported basis, revenue was up 3.2% to $3.3 billion. Net profit was up 15% to $653 million.
“The strength and resilience of Infosys was fully visible in Q2 with operating metrics witnessing a healthy increase, broad-based growth, highest ever large deal TCV at $3.1 billion and attrition reducing to single digits,” said Rao.
Digital revenue, the company said, grew at 25% year-over-year and represents 47% of the topline. “We will cross the 50% mark soon,” said CEO Salil Parekh, who will complete three years in office in January. “We are seeing the benefits of the investments made in the last 2-3 years. While large deal wins are more volatile and not predictable every quarter, the overall deal pipeline is fairly good,” he said.
That prompted the company to up its revenue guidance to 2-3% annual growth, from 0-2% predicted earlier. The company’s American Depositary Receipts (ADRs) were up 5.5% in morning trade on the New York Stock Exchange.
While client discretionary spends continue to remain patchy, they are also focusing on leveraging the benefits of cloud migration to automate processes or workforce management that helps them scale and adapt to the new normal, Parekh added.
ICICI Direct Research said Infosys reported another healthy quarter and registered healthy deal wins. “In addition, the company has consistently outperformed TCS in revenue terms over the past few quarters and is also narrowing the gap between its margins,” it said.
Increasing focus on digital has helped Infosys improve margins. Last quarter it soared to 25.4%, 370 basis points higher than last year. It was also aided by increasing offshore work and less travel costs. Chief financial officer Nilanjan Roy cautioned that margins will come down in the coming quarters as the salary increase takes effect and travel resumes sometime next year.
Among business verticals, financial services was the growth driver – up 2.9% in constant currency – with banking, mortgage process payment and lending performing well. Retail is showing signs of returning to normal, Rao said.
