After TCS, what will Infosys' Q1FY18 report card show?

After TCS muted show, it is now Infosys turn. IT-major Infosys is set to announce its financial result for the quarter ended on June 30, 2017.

In the last quarter, or Q4FY17, the company's consolidated net profit grew by 0.2% to Rs 3,603 crore as compared to Rs 3,597 crore in Q4FY16. 

Vishal Sikka, CEO of Infosys had said, “Unanticipated execution challenges and distractions in a seasonally soft quarter affected our overall performance. At the same time, we continued to see many positive signs of our strategy execution; our softwareled offerings continued to show strong momentum and client success, with continued adoption of Mana, our AI platform; Zero Distance marked its 2-year anniversary as a grassroots cultural movement for innovation with strong client resonance, and our employee engagement continued to drive down attrition, especially with top performers."

For the current fiscal or FY18, the company had projected a growth rate of 6.5 to 8.5 per cent in FY18, indicating the company is back to its lower growth numbers before Sikka, who was hired from business software-maker SAP to transform the company.  

ALSO READ: Here are 10 key takeaways of Infosys Q4 FY17 earnings

What will be the case in Q1FY18?

The experts are in view that the top IT firms are likely to report muted financial performance for the April- June quarter, with margins coming under pressure on account of rupee appreciation and wage revision.

The IT firms are also under pressure to hire local workers instead of taking Indian employees on work visas to client sites as the US hardens its stance on outsourcing. Higher on-site hiring means higher costs.

Infosys has said it will hire 10,000 people in the US over the next two years.

ALSO READ: Expect Q1 performance of IT cos to be muted, say experts

According to a research report by Motilal Oswal, Infosys is estimated to report revenue growth of 2.2 QoQ on the back of gradual recovery in BFSI, offset by continued pressure in Retail. Cross-currency tailwinds of 80bp would result in USD revenue growth of 3%.

"We expect EBITDA margin to decline by 80bp QoQ to 26.4%, led by INR appreciation and visa expenses.Our PAT estimate is Rs 34.4 billion, -4.6% QoQ, led by lower profitability and higher ETR," the report said. 

Having similar views, Prabhudas Lilladher in its report said, "We expect Infosys to report 2.9% QoQ growth in USD revenues for the quarter (cc growth at 2.9% QoQ). Infosys has guided for 6.5‐8.5% USD revenue growth in constant currency for FY18. We expect the company to maintain constant currency revenue growth guidance. We have modeled Infosys’ USD revenues to grow by 7.8% for FY18E. Company has pushed wage hikes to July 2017; hence, Q1FY18 will not have the impact of wage hikes. However, headwinds from Rupee appreciation and visa expenses will weigh on margins. We model EBITDA margins at 25.7% for Q1FY18, down 150bps QoQ."

Ambit in its report said that there are two key margin headwinds, first INR appreciation, and second visa costs. "We are currently not factoring in incremental costs because of wage hikes as news reports suggest that wage hike is delayed to Sep-17 quarter with no wage hike arrears for the period from April-June."

It expects the company to report PAT at Rs 3400 crore in Q1FY18 as against Rs 3600 crore in Q4FY17, which is a drop of 6% on q-o-q basis. 

Ahead of result announcement, the shares of the company on Thursday closed at Rs 976.3 per piece, up 0.26% or Rs 2.50 on BSE.