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Technology

Infosys boosts revenue growth forecast on US reopening hopes

Indian IT services group reports over 20% jump in quarterly profit

The Infosys campus in Bangalore: The Indian company expects to hire 35,000 graduates as demand for talent grows.   © Reuters

MUMBAI -- Infosys, India's second-largest software services exporter, on Wednesday raised its top line growth forecast for the current fiscal year, anticipating a post-pandemic rebound in contracts as U.S. and European companies accelerate their shift to mobile technology.

The New York- and Indian-listed company reported a 22.7% year-on-year rise in net profit for the April-June quarter to 51.95 billion rupees ($697 million). Revenue growth guidance was upgraded to 14% to 16% for the year ending March 2022 in constant-currency terms.

Infosys continues earnings season for India's IT sector, which spans system development, call center operations and other cross-border services contributing to the country's export earnings. Infosys' IT services clients include the French Open and steelmaker ArcelorMittal.

Consolidated revenue grew 16.9% in constant-currency terms in the first quarter of the financial year to 278.96 billion rupees, for "the fastest pace in Q1 in a decade," said Infosys CEO Salil Parekh.

Domestic rival Tata Consultancy Services reported slower quarterly revenue growth than Infosys last week, with Wipro and HCL Technologies to announced their results in the coming days.

Infosys previously forecast full-year revenue to grow in the range of 12% to 14%, along with operating margin growth of 22% to 24%.

"We remain confident of delivering on the margin guidance, underpinned by our comprehensive cost optimization program, despite increasing cost headwinds arising largely from compensation review, talent acquisition and retention," Chief Financial Officer Nilanjan Roy said.

During the quarter, the digital business was a major contributor to the company's revenue gain, rising 42.1% on the year to $2.04 billion -- even as the core business was lower by 3% at $1.74 billion. The digital segment's slice of the total revenue pie grew to 53.9% in the June quarter, up from around 44% in the same period last year. The contracts it won in the June quarter totaled $2.6 billion, with two new clients signing deals worth over $100 million.

The company also said it plans to hire 35,000 fresh graduates during the 2022 financial year to fill the supply-side gap created as companies accelerate their IT spending.

"As the demand for digital talent explodes, rising attrition in the industry poses a near-term challenge. We plan to meet this demand by expanding our hiring program of college graduates for FY22 to 35,000 globally," said Pravin Rao, chief operating officer. "Whereas, voluntary attrition in IT services at Infosys rose to 13.9% in the June quarter as compared to 10.9% in the March quarter."

Indian IT firms have been riding on the technology upgrade wave undertaken by major companies globally for the past couple of quarters. The deals made during this time are expected to support growth for these companies over the next two financial years.

However, according to local brokerage Ambit, though the 2021-22 financial year looks strong for top-tier Indian IT firms, growth will return to mid-single digits in the next year.

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