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Infosys increases revenue growth forecast amid upbeat technology spending trend

Third-quarter profit, however, lags behind estimates on one-time expenses

  © Reuters

MUMBAI (NewsRise) -- Infosys raised its revenue growth forecast for this fiscal year, reflecting India's second-largest software exporter's bullish outlook on technology spending.

The New York- and Mumbai-listed company expects its revenue, barring currency fluctuations, to grow 8.5% to 9% in the year ending in March, it said in a statement on Friday. The company had previously forecast 6% to 8% growth for this fiscal year.

The software exporter also said it will buy back shares worth 82.60 billion rupees ($1.2 billion) at a price not more than 800 rupees apiece. It will also pay about 21.07 billion rupees in special dividend at 4 rupees a share. Infosys had last year identified $2 billion to be paid to shareholders, of which $400 million was paid as special divided.

"Many of our (business) segments are growing well. Across the board, we have a strong pipeline and deal wins," Chief Executive Salil Parekh told reporters at a news conference in Bengaluru, where the company is based. "We feel confident about this fiscal year."

For the quarter ended in December, Infosys' profit plunged 30% to 36.09 billion rupees. That was below analysts' expectation of 41.31 billion rupees in a Refinitiv poll. Revenue grew more than 20% to 214 billion rupees. The year-earlier quarter included tax benefits from the firm's deal with U.S. Internal Revenue Service.

Parekh said the company's profit margins were hurt by the "planned investments" to address new growth opportunities and the one-off expenses.

The profit for the quarter was hurt by additional depreciation and amortization costs worth 880 million rupees and 4.51 billion-rupees cut in the fair value of Skava, one of the two assets Infosys previously held for sale. Infosys had also put Panaya, an Israeli automation firm it bought in 2015, for sale last year.

The acquisition of Panaya was the main reason for a board room battle that shook Infosys' leadership two years ago. The company said it no longer considers it "highly probable" that sale of these assets can be completed by March 31. Hence it now plans to repurpose some of Skava's solutions and refocus on Panaya's offerings.

Infosys's digital services revenue grew 33% in the quarter, accounting for nearly a third of the company's overall revenue. The Bengaluru-based company saw its orderbook expand $1.5 billion, taking the total contract value to $4.7 billion at the end of December.

Infosys's results come a day after larger rival Tata Consultancy Services reported a record quarterly profit and the highest revenue growth in 14 quarters. Still, India's largest outsourcing company disappointed investors with a weak expansion in margins amid rising cost of operations in the U.S. and currency volatility.

India's software export industry has been growing at a healthy pace over the past few quarters thanks to the surging investments in new internet technologies. However, an escalating trade row between the U.S. and China and fears of Britain exiting from the European Union without a trade deal have stirred fears of a global slowdown that will cap the technology investments by clients.

"There are macroeconomic situations that we are watching carefully. From where we stand now, we don't see any impact," Parekh said. He said the company is not witnessing any change in demand in spite of the uncertainties.

Infosys is barely returning to normalcy with new CEO Parekh taking charge last February after the boardroom tussle in 2016 pushed the company into turbulence for more than a year.

Ahead of the earnings, shares of Infosys rose 0.6% in Mumbai trading, while TCS lost 2.5%. The benchmark S&P BSE Sensex fell 0.3%.

--Dhanya Ann Thoppil

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