Infosys to sell Panaya, Skava; posts 28% drop in QoQ profit

Salil Parekh, the new CEO of Infosys Friday announced plans to put subsidiaries Skava and Panaya on sale while reporting the company's fourth quarter earnings. The acquisitions were done under predecessor and first non-co-founder CEO Vishal Sikka.

The Panaya deal had put the company in the eye of a storm last year when founders started questioning corporate governance practices pertaining to the deal.  Sikka stepped down in August and Parekh, a veteran of French IT company Capgemini, took over the reins.

Infosys, India’s second largest information technology company, reported a 28 percent sequential fall in net profit to Rs 3,690 crore in the Q4FY18, in line with analysts' expectations.

The sequential drop in fourth quarter profit was also because Q3 FY18 included positive impact of USD 225 million on account of conclusion of an APA with the US IRS.

Company's full year constant currency revenue guidance is at 6-8 percent and dollar revenue at 7-9 percent, which is in line with estimates.

However, it revised the EBIT margin guidance downwards to 22-24 percent from 23-25 percent. This will include the impact from revised compensation for FY19 .

On the sale of the two subsidiaries Infosys said, "In the quarter ended March 2018, the company initiated identification and evaluation of potential buyers for its subsidiaries, Kallidus and Skava (together referred to as Skava) and Panaya. The company anticipates completion of the sale by March 2019 and accordingly, assets amounting to Rs 2,060 crore (USD 316 million) and liabilities amounting to Rs 324 crore (USD 50 million) in respect of the disposal group have been reclassified and presented as "held for sale."

On reclassification, the company has recoganised an impairment loss of Rs 118 crore (USD 18 million) in respect of Panaya in the consolidated profit and loss for the quarter and year ended March 2018. The corresponding write down in the investment value of Panaya in the standalone financial statements is Rs 589 crore (USD 90 million), it added.

Infosys also announced it has entered into a definitive agreement to acquire WongDoody Holding Company, Inc., a US-based digital creative and consumer insights agency.

Dollar revenue growth was at 1.8 percent and in constant currency terms it was 0.6 percent.

The company reported consolidated revenue of Rs 18,083 crore for the quarter ended March, compared with Rs 17,794 crore reported in the December quarter.

FY18 revenues grew by 7.2 percent in USD terms, 5.8 percent in constant currency terms, with operating margins at 24.3 percent, which was in line with expectations.

The company recommended a final dividend of Rs 20.50/- per equity share for the financial year ended March 31, 2018 and special dividend of Rs 10/- per equity share.

The company specified its capital allocation policy. The Board has identified an amount of upto Rs 13,000 crores (USD 2 billion) to be paid to shareholders in the following manner;

a) A special dividend of Rs 10 per share (USD 0.15 per ADR) resulting in a payout of approximately Rs 2,600 crore (approximately USD 400 million) in June 2018. b) Identified an amount of upto approximately Rs 10,400 crore (approximately USD 1,600 million) to be paid out to shareholders for FY19.

“I am pleased with our healthy revenue growth, profitability, and cash generation in Q4. Our robust performance is a reflection of the strong impact we have with our clients and the dedication of our employees,” said Salil Parekh, CEO.

Reacting to the result, ICICI Securities said in a note that earnings with revenue in-line with our expectations while it was better-than-expected on the margin front. However, it said there was a disappointment on the margin guidance front as Infosys has lowered its EBIT margin range.

At close, Infosys was quoting at Rs 1,169.00, up Rs 6.75, or 0.58 percent. It touched an intraday high of Rs 1,184.00 and an intraday low of Rs 1,150.20 on BSE today.

This story first appeared on Moneycontrol.com