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Infosys raises revenue growth forecast, betting on large outsourcing deals

Probe clears CEO and CFO of allegations of unethical practices

Infosys said it expects its revenue in constant currency terms to grow 10% to 10.5% in the fiscal year ending in March.   © Getty Images

MUMBAI (NewsRise) -- Infosys, India's second-largest software exporter, raised its annual dollar revenue growth forecast amid a steady string of large outsourcing deals and robust demand for digital services.

The company also said its audit panel, along with external investigation agencies, gave a clean chit to Chief Executive Salil Parekh and Chief Financial Officer Nilanjan Roy after a probe found no evidence of "financial impropriety" against them.

Infosys said it expects its revenue in constant currency terms to grow 10% to 10.5% in the fiscal year ending in March, compared with 9% to 10% it previously forecast.

The Mumbai and New York-listed company also reported a more than 23% jump in profit for the third quarter ended December to 44.6 billion rupees ($629 million), while its revenue grew 7.9%. Analysts were expecting the company to post a profit of 42.1 billion rupees, according to Refinitiv data. Infosys said the profit included interest on income tax refunds amounting to $34 million.

The third-quarter performance underscores the clients' shift to digital transformation, Chief Executive Parekh told reporters.

Infosys said in a separate statement that investigations by the audit committee and independent legal counsel Shardul Amarchand Mangaldas & Co., and PricewaterhouseCoopers found that the allegations against the executives are "substantially without merit." As a result, there is no change to its previously reported financial statements or other financial information, it added.

The probe was initiated after two whistleblower complaints late last year alleged that the company's top two executives used "unethical business practices" to bulk up its revenue and profit. The complaints had alleged CEO Parekh bypassed reviews and approvals for large deals, fearing a backlash on its growth targets, while CFO Roy allegedly abetted hiding issues around such deals. The disclosure, on Oct. 21, led to a 16% crash in Infosys shares, its biggest intraday drop in six and a half years, wiping off $6.6 billion in market capitalization.

Even as Infosys backed its CEO, the company is being probed by the capital markets regulator Securities and Exchange Board of India, as well as the U.S. Securities Exchange Commission. The company said it continues to cooperate with the SEC and Indian regulatory authorities. A class-action lawsuit has been filed against it in the U.S., and Infosys said it intends to "vigorously" defend the litigation.

The whistle blower issue struck the Bengaluru-based company just as it shook off the effects of a similar complaint in the past that led to a boardroom tussle rocking it for months.

Its performance, and that of its peers, has improved in recent quarters by surging investments in new internet technologies such as cloud computing and artificial intelligence.

The total value of large deals at Infosys was at $1.8 billion in October-December. Revenue from digital services, which account for 41% of revenue, jumped more than 41% in the quarter.

The performance defies analysts' concerns of slowing client spending on outsourcing in the U.S., which is bracing for an election this year. The trade row between the U.S. and China and fears of Britain exiting from the European Union without a trade deal also pose a threat to the industry's prospects.

Ahead of the results, Infosys shares gained 1.5% in Mumbai trading, while the benchmark S&P BSE Sensex closed up 0.4%.

--Dhanya Ann Thoppil

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