India’s second-biggest IT firm Infosys Ltd retained its revenue outlook for the fiscal year to March, with its chief executive upbeat about demand for the company’s services in the key markets of the United States and Europe. But a 3.7 per cent rise in quarterly net profit, the state of its key financial business and no upgrade to the guidance outweighed the announcement of a bonus issue of equity shares and stock dividend of American depositary shares in a 1:1 ratio. The company’s New York-listed shares fell 3.8 per cent by 1435 GMT.
Infosys posted a profit of 36.12 billion rupees ($526.9 million) in the three months to June, missing estimates due to a one-off charge of $39 million related to the fair value reduction of its Panaya unit. Analysts, on average, expected a net profit of 37.40 billion rupees, according to Thomson Reuters data.
It said in April it had begun looking for buyers for Skava and Panaya – firms Infosys had bought in 2015, during former chief Vishal Sikka’s tenure – and expected to complete their sale by March 2019. Revenue from operations rose 12 per cent to 191.28 billion rupees.
Bigger rival Tata Consultancy services wowed investors this week as it posted a record net profit of over $1 billion, helped by a rebound in the key division and said it expected growth in its banking, financial services and insurance (BFSI) unit to remain strong in the next one to two years.
THREE YEAR PLAN
Though Infosys’ share of revenue from its key financial services segment dipped to 31.8 per cent in the quarter to June, from 33 per cent a year ago, Chief Executive Salil Parekh said that business was generating very strong demand. Large deal wins by Infosys crossed $1 billion, of which more than 40 per cent were from the financial services sector, he said.
“Overall we see a good demand environment across the US Europe and Asia Pacific,” Parekh told a news conference, as the company maintained its 6 to 8 percent revenue growth for the year to March in constant currency terms. “In terms of sector demand we see strength in energy, utilities, retail, insurance and manufacturing.”
Infosys has previously said it has a three-year roadmap – the first year in fiscal 2019 to stabilize, the second year to start to build momentum and the third year to start to accelerate. “There is some disappointment as the BFSI space didn’t do very well,” said Harit Shah of local brokerage Reliance Securities.
Infosys and its rival IT firms, headquartered mostly in the Southern Indian tech hub of Bengaluru, gained prominence by giving Western clients low-cost solutions to problems such as the Y2K bug, and then gradually began to alter international business as outsourcing expanded.
These IT companies, now facing a margin squeeze in traditional outsourcing business, say they are helping global clients transform legacy businesses using digital services, automation and artificial intelligence. ($1 = 68.5525 Indian rupees)