Infosys BPM saw slowest growth in 6 years as revenue drops from top clients in FY23

economictimes.indiatimes.com:

Infosys’ business process management (BPM) arm – the largest subsidiary of the IT company – last fiscal year recorded its slowest growth since 2016-17, hurt by a decline in revenue from its top accounts and the nature of deals where the bulk of the proceeds were already accounted for in the previous two years. Revenue at $934 million for the year ended March 31 grew at 4.2% from the year before. Operating margin of 17% was the narrowest in at least a decade.

“Revenue from top-10 clients declined by $28 million, or 6.4% (in FY23), of which the top client contributed $22 million,” Kotak Institutional Equities said in a research report. The top client’s revenue contribution too declined 15.3% to $121 million. However, excluding top 10 clients, the revenue grew at a “healthy” 14.5% on year, the report added.

An email sent to Infosys seeking comment remained unanswered at press time Monday. The BPM arm accounted for 5.1% of Infosys’ revenue of $18.21 billion in FY23, according to ET’s calculations. Apart from a lower contribution from the top clients, experts said the deceleration in growth was also because of the nature of BPM deals and the base effect after witnessing strong post-Covid growth in demand.

“The current trends (low growth) are primarily due to 20-30% lower value from large deals as compared to when the deals started. There is much more recognition of revenue in the early years and then a deceleration in the latter years,” said Peter Bendor-Samuel, founder and chief executive at IT research firm Everest Group. “Hence, we are now entering year three with the mega deals recognising less revenue,” he said.