Infosys Limited Form 20-F Summary
Reporting period: Annual report for the fiscal year ended March 31, 2021, prepared under IFRS as issued by the IASB and presented in U.S. dollars. The request references “2020 Q4,” but the supplied filing is the fiscal 2021 Form 20-F and does not provide a standalone fourth-quarter summary.
Business context
Infosys is an India-based global provider of consulting, technology, outsourcing, business process management and digital transformation services. Revenue is concentrated in North America and Europe, while a significant portion of delivery and employees are based in India. Digital services represented 48.5% of fiscal 2021 revenue, up from 39.2% in fiscal 2020.
- Fiscal 2021 revenue mix by geography: North America 61.3%, Europe 24.2%, rest of world 11.6%, India 2.9%.
- Largest industry segment: Financial Services and Insurance at 32.4% of revenue.
- Employees increased to 259,619 at March 31, 2021, including 245,037 client-service professionals.
- Approximately 96.5% of employees were working remotely at year-end, and 99.3% had been enabled for secure remote work.
Financial performance and liquidity
| U.S. dollars in millions, except per-share data | Fiscal 2021 | Fiscal 2020 | Change |
|---|---|---|---|
| Revenue | 13,561 | 12,780 | 6.1% |
| Gross profit | 4,733 | 4,228 | 11.9% |
| Operating profit | 3,325 | 2,724 | 22.1% |
| Profit before tax | 3,596 | 3,095 | 16.2% |
| Net profit | 2,623 | 2,338 | 12.2% |
| Profit attributable to owners | 2,613 | 2,331 | 12.1% |
| Basic EPS | $0.62 | $0.55 | Increase |
| Diluted EPS | $0.61 | $0.55 | Increase |
| Net cash from operating activities | 3,258 | 2,611 | 24.8% |
| Capital expenditures | 285 | 465 | Decrease |
- Gross margin improved to 34.9% from 33.1%; operating margin improved to 24.5% from 21.3%; net margin increased to 19.3% from 18.3%.
- Improved profitability reflected the higher offshore mix, rupee depreciation against the U.S. dollar, lower travel and visa costs, and cost optimization. These benefits were partly offset by higher employee compensation and third-party delivery costs.
- Other income declined to $297 million from $395 million, principally because of lower investment income and less favorable foreign-exchange translation effects.
- Effective tax rate increased to 27.1% from 24.5%, primarily because of lower benefits from Indian Special Economic Zone incentives.
- Cash and cash equivalents were $3,380 million and current investments were $320 million at March 31, 2021. Working capital was $5,043 million.
- The company reported no outstanding borrowings. Lease liabilities totaled $728 million, including current and non-current portions.
- Trade receivables were $2,639 million and unbilled revenue was $1,111 million; days sales outstanding increased to 71 days from 69 days.
Material changes versus the prior comparable period
- Revenue growth was 6.1% in reported currency and 5.0% in constant currency.
- Digital revenue increased to $6,577 million from $5,008 million, while core revenue declined to $6,984 million from $7,772 million.
- Revenue from products and platforms increased to $957 million from $777 million; software-services revenue increased to $12,604 million from $12,003 million.
- Onsite revenue mix decreased to 52.1% from 54.8%, while offshore revenue mix increased to 47.9% from 45.2%, largely because of pandemic-related travel restrictions and client cost reductions.
- Operating cash flow increased by $647 million, while investing cash outflow increased to $1,129 million, including acquisitions and investments.
- Fiscal 2021 acquisitions included GuideVision, Kaleidoscope Innovation and Blue Acorn iCi. Aggregate purchase consideration was $189 million, including $176 million of cash and $13 million of estimated contingent consideration.
- The company paid $1,226 million in dividends during fiscal 2021 and proposed a final dividend of ₹15 per share, subject to shareholder approval.
Guidance, outlook, commentary and risks
- Management emphasized continued investment in cloud, digital transformation, artificial intelligence, automation, reskilling and workforce localization. Large-deal total contract value exceeded $14 billion in fiscal 2021.
- The capital allocation policy targets returning approximately 85% of cumulative free cash flow over five years through dividends, buybacks and/or special dividends, subject to applicable approvals and law.
- On April 14, 2021, the Board approved a proposed open-market buyback of up to ₹9,200 crore, approximately $1,227 million, at a maximum price of ₹1,750 per share. The proposal required shareholder and regulatory approvals and was not completed as of the filing date.
- Management stated that the fiscal 2021 revenue impact of COVID-19 was not significant based on its estimates, but identified continuing risks from future infection waves, employee absence, remote-work productivity, cybersecurity, data privacy, client delays, pricing concessions, extended payment terms and potential contract disputes.
- Major structural risks include dependence on technology spending by clients, intense competition, pricing pressure, client concentration, employee attrition and wage inflation, immigration and visa restrictions, foreign-exchange volatility, fixed-price contract execution, tax-incentive reductions and cybersecurity or privacy incidents.
- The largest client represented 3.2% of fiscal 2021 revenue and the ten largest clients represented 18.1%.
- Foreign-exchange exposure is material: 66.5% of fiscal 2021 revenue was U.S.-dollar denominated. Management estimated that each 1% movement in the Indian rupee against the U.S. dollar affected incremental operating margins by approximately 0.47%.
- Income-tax claims not acknowledged as debts totaled $473 million at March 31, 2021. Management expects its tax positions to be upheld and does not expect a material adverse effect, but the matters remain pending before appellate authorities.
- Other claims against the Group, excluding income-tax claims, totaled $82 million. Management expects ordinary-course litigation not to have a material adverse effect.
- Management and Deloitte Haskins & Sells LLP concluded that internal control over financial reporting was effective as of March 31, 2021. The financial statement and internal-control audit opinions were unqualified.
Most important facts for investors to verify
- Confirm that the relevant period is fiscal 2021, not calendar-year 2020 Q4, and review any separate quarterly filing if a quarter-specific analysis is required.
- Reconcile reported revenue growth with constant-currency growth and assess the sustainability of the 24.5% operating margin.
- Monitor receivables, unbilled revenue and the increase in days sales outstanding, particularly as COVID-19 and client financial stress could affect collections.
- Verify shareholder approval, execution timing, minimum purchase requirements and tax consequences of the proposed ₹9,200 crore buyback and ₹15 final dividend.
- Assess the effects of expiring Indian tax incentives and the 27.1% effective tax rate on future earnings.
- Review acquisition integration, contingent consideration of up to $16 million undiscounted for fiscal 2021 acquisitions, and related employee retention payouts.
- Evaluate exposure to foreign exchange, immigration restrictions, wage inflation, fixed-price contracts, cybersecurity, data privacy and remote-work execution.