Infosys Ltd, India’s second-biggest IT firm, on Friday posted a 38.3 per cent rise in net profit at Rs 5,129 crore for the quarter ended December 2017 as against Rs 3,708 crore in the same period of last year, aided by tax benefits from the firm’s deal with the US Internal Revenue Service (IRS).
The net profit in Q3 showed an increase of 37.6 per cent from the September quarter (Q2). Revenue for the third quarter rose by 3 per cent to Rs 17,794 crore from Rs 17,273 crore in the same period of last year.
Infosys has concluded an Advance Pricing Agreement (APA) with the US IRS, under which Infosys and the IRS have agreed on the methodology to allocate revenues and compute the taxable income of the company’s US operations. This agreement covers financial years from 2011 to 2021. The APA will enhance predictability of Infosys’ tax obligations in respect of its US operations.
As per the terms of APA, Infosys has reversed tax provisions of Rs 1,432 crore made in previous periods which are no longer required (both under International Financial Reporting Standards and Indian Accounting Standards). Further, in line with the APA, Infosys expects to pay out $ 233 million due to the difference between the taxes payable for prior periods as per the APA and the actual taxes paid for such periods. The reversal of the tax provisions had a positive impact on the consolidated basic EPS for the quarter ending December 2017 by Rs 6.29, Infosys said.
The company also retained revenue growth projection in the range of 5.5 per cent to 6.5 per cent for the current year.
It reported a sequential revenue growth of 1.3 per cent for the third quarter and one per cent in rupee and dollar terms respectively.
Salil Parekh, who joined the firm as the new CEO on January 2, said he would lay out updated strategic priorities for the company by April after the company maintained its full-year revenue outlook.
Parekh said that his first priority was to connect with employees and clients and “build a road map’’ for the company.
He said he had been directed by non-executive Chairman Nandan Nilekani “to get the job done’’. “It is a privilege for me to be appointed as the CEO & MD of Infosys, helping our clients navigate the digital future and employees build new skills and capabilities. Our Q3 performance is strong. We had 8 per cent year-on-year growth and 24.3 percent operating margin with $ 593 million of free cash flow,” he said. “We are progressing towards stability and are well positioned to serve our clients in the new areas of demand,” said Parekh.
The business environment was one of great opportunities and the company needs to be positioned in make the best of the opportunities, he said. “A very good performance considering it is traditionally a very soft corner,’’ the company’s COO Pravin Rao said regarding the third quarter performance. “Increased adoption of our digital offerings and new services helped stabilise price realisation. We were able to grow client relationships across revenue categories. During the quarter, we provided compensation increases and higher variable payouts to our employees. Our investments in employees continues to deliver results as reflected in lower attrition,” Rao said. “Our operating margins were stable on the back of broad-based improvement in operational efficiency parameters. Our cash generation continued to be robust during the quarter.” said MD Ranganath, CFO of the company.