Will revisit FY23 outlook as things become clearer through the year: Infosys CEO Salil Parekh

Bengaluru/Mumbai/New Delhi: Global demand for technology services “ looks very good” with “no impact”, as yet, from prevailing geopolitical issues, Infosys chief executive and managing director Salil Parekh told ET. Buoyed by the “ robust deal pipeline” India’s second largest software exporter expects it will grow at a fast clip having forecast revenue expansion of 13-15 % for the year, its “strongest guidance in a long time,” Parekh said in an exclusive interview on Thursday.

On Monday, the industry bellwether that is also battling record attrition saw its stock price crash by 9%–the steepest fall during a day in the past two years– after it missed street estimates in its fourth quarter earnings having reported 1.2% revenue growth and 2.1% in net profit, sequentially.

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Noting that stock markets “ will do what they decide”, Parekh said the company is not accounting for any possible impact of geopolitical uncertainties as it hasn’t come up in any client conversations, to date.

“We don’t see anything which gives me any concern,” said the 57 year-old CEO, who in the last six weeks has been “on the road meeting with clients in the US, twice in Europe,” adding that “ of course, we are all reading and hearing about what’s going on in the world.”

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“As we get more colour, we will look at (revisiting the revenue guidance) in the future,” he cautioned.

The Bengaluru-headquartered company, which was impacted by a client-specific issue, higher subcontracting costs and talent-related issues during the last quarter of fiscal 2022, is clear that it’s guidance for this financial year comes from three fundamental factors, according to Parekh.

“We ran a very successful strategy over the last four years. And now we are embarking on a strategy to support the next several years,” he said.

Infosys gained momentum in recent years on the back of its cloud-based services and digital deals. amid intense competition for the digital pie of clients’ businesses. Its focus on this space helped during the pandemic when businesses were forced to adopt work-from-anywhere. The share of digital in overall revenue stood at 59.2% at the end of fiscal 2022 up from 26.8% in fiscal year 2018.

The number of clients with contracts worth $100 million and above increased to 38 as of March from 20 at the end of the financial year ending 2018.

Infosys is the winner of the Company of the Year in the ET Awards for Corporate Excellence 2022.

Last week, the $87-billion-dollar company exceeded market expectations with its revenue guidance for the fiscal on the back of strong demand for technology services.

According to Parekh, the geopolitical uncertainties have not impacted the demand environment and Infosys’ large clients across North America and Europe “continue to have discussions on cloud-based large transformation deals.”

However, the company’s forecast of operating margins in the range of 21-23%, disappointed the street, which expects larger rival Tata Consultancy Services to declare margins of between 26-28%. TCS does not offer a forecast of its revenue and earnings.

Pointing out that with resumption of business travel and a partial return-to-office, the company has had to factor these costs into its guidance, Parekh said, “ the key to all this is making sure that our capabilities are at the forefront and making sure that employees are well looked after, and then being realistic about what is going to happen,”.

Attrition woes


In the last financial year, Infosys recorded unprecedented levels of attrition at 27.7% much higher than 17.4% for TCS, while even smaller rivals like Mindtree and LTI have reported lower numbers.

Parekh said the company has now started rolling out its annual wage hikes with effect from April – and is also working on “something actively” to stem the steep rise in the heightened attrition. He did not provide a range in which salary hikes will be given out, only saying that “details of the new initiatives will be revealed later.”

On the other hand, TCS has said that it will offer hikes equal to or above the ranges of 6-8% offered in FY22.

“…Because we’ve seen a decline of five points (in attrition) in this Q4. We believe that things will start to look better in the coming quarters,” said Parekh. The company hired over 85,000 freshers last fiscal and expects to bring in about 50,000 freshers in the current financial year.

“As we go through the year we will see how the demand is and we will make adjustments to college graduate hiring ,” Parekh added.

Responding to the complaint by a Pune-based labour union– Nascent Information Technology Employees Senate– on the ‘non-compete’ agreement clause in Infosys employment contracts, Parekh said the practice has been in vogue “for quite a long time now and its main objective is to protect the intellectual property and other business interests of clients.”

“Our employees will work with other companies as and when they choose to. So that is not the constraint from our perspective at all,” he said.

ET reported on Tuesday that the labour union has raised a complaint against the company with the central labour ministry about a clause in offer letters that prevents them from accepting job offers from specific competitors.

Deal pipeline

Infosys’s deal wins at $9.5 billion large deal total contract value for the 2022 fiscal were 33% lower than the previous year.

However, Parekh said this year with 40% net new deals for FY22 and 48% net new deals for the quarter March quarter the company has good visibility on the deal pipeline.

“Whether it’s the one above $100 million or above $50 million, they have significantly gone up over the last several years. And that is an approach that shows that our clients have more and more confidence in giving us different types of work, not just one,” he added.

Noting that while wage inflation has an immediate impact compared to price hikes, clients are factoring in these concerns during pricing discussions.

“Our view is that over time the balance comes back and that’s why we are quite comfortable. That we will remain a high-margin business,” he said.

India business

Throwing light on the company’s approach to government projects after its fractious engagement on the Income Tax portal, Parekh said that “over seven crore returns have been filed on the portal.” A large number of returns have been processed and a large number of refunds have already been made, over one crore statutory forms have been filled out, he pointed out.

“Today there is a tremendous amount of progress, working jointly with the department… Our approach remains very much the same, which is to support the Digital Agenda for the government.”

Parekh said that over the last four years there has been “tremendous stability” within the company, with “industry leading growth” and its “One Infosys” strategy having worked well.

“So, at this stage, we plan no organizational element changes,” said the Infosys CEO.