- Shares surge most since July as 3Q revenue rises 15%
- Software maker sees FY16 USD sales growth at 8.9%-9.3%
Infosys Ltd., India’s second-largest software exporter, raised its annual sales growth outlook after reporting a better-than-expected profit in a quarter that proved “challenging” for its bigger rival Tata Consultancy Services Ltd. Shares rallied.
Net income at the Bengaluru-based services provider rose 6.6 percent to 34.7 billion rupees ($515 million), the company said in a statement today, beating the average estimate of 33.5 billion rupees in a Bloomberg survey of 25 analysts. Sales in dollar terms is set to grow between 8.9 percent and 9.3 percent in the year ending March 31, Infosys said, compared with an earlier forecast for 6.4 percent to 8.4 percent.
“The guidance is confidence-inspiring,” said Deven Choksey, managing director of Mumbai-based KR Choksey Shares & Securities Ltd. “Things can only improve from here as clarity emerges in the U.S. The stock will be re-rated despite the difficult market conditions.”
Group sales for the quarter climbed 15 percent to 159 billion rupees, exceeding the 157.7 billion-rupee average estimate in the survey. The stock surged 4.6 percent to 1,133 rupees in Mumbai, capping the best performance since July 21. The benchmark S&P BSE Sensex fell 0.3 percent.
Deluge in Chennai
Infosys’s forecast for a better annual sales performance is in contrast to that of Tata Consultancy, which on Tuesday reported revenue that missed estimates in a quarter marked by seasonal holidays, furloughs in the U.S. and floods. An unprecedented deluge in the southern Indian city of Chennai last month disrupted work at software makers with local delivery centers, reducing billable hours.
“We have been able to navigate the quarter, better than our earlier expectations,” Infosys Chief Financial Officer M.D. Ranganath said in the statement. “We will continue to focus on enhancing operational efficiency.”
Teaneck, New Jersey-based Cognizant Technology Solutions Corp., which has 11 delivery and operations centers in Chennai, said in a statement Tuesday that its business continuity plan “largely mitigated” the financial impact from the flooding in December. It reaffirmed its 2015 revenue guidance of at least $12.41 billion.
In the quarter, Infosys said it signed four “large” deals. The Mercedes Benz Research and Development Center in India partnered Infosys to run their complete data and network operations support in 15 countries across the Asia-Pacific region, according to the statement.
Net profit rose 2 percent in rupee terms from the previous quarter, while revenue increased 1.7 percent, the company said. Employee attrition declined to 13.4 percent on standalone basis. In constant-currency terms, Infosys said its revenue is set to grow between 12.8 percent and 13.2 percent in the year ending March 31.
Information technology budgets for 2016 may remain flat or decline “marginally,” Chief Operation Officer U.B. Pravin Rao told reporters in Bengaluru on Thursday.
“There’s still some uncertainty,” he said. “Some of the industries, like for instance energy, there’s tremendous pressure. They want to do same stuff with less money.”
Punita Kumar Sinha was appointed independent director by the board with immediate effect, according to the statement.