Infosys Shares Jump as Dollar Sales Forecast Beats Estimates

Infosys Ltd. surged the most in six months in Mumbai trading after first-quarter profit rose and the company’s sales forecast in dollar terms beat analyst estimates.

Infosys expects dollar revenue to increase by 6 percent to 10 percent in the 12 months ending March, unchanged from its April forecast, India’s second-largest software exporter said in a statement today. Ten analysts in a Bloomberg News survey predicted Infosys to cut the top end of its guidance range to 7.5 percent.

“The numbers are all in all better than what we’d been expecting,” said Ankita Somani, an analyst at Angel Broking Ltd. in Mumbai. “They maintained their dollar revenue guidance from before, which is positive.”

Net income rose 3.7 percent to 23.7 billion rupees ($396 million) in the three months ended June, from 22.9 billion rupees a year earlier, as the rupee’s fall to a record boosted the value of overseas sales for the Bangalore-based company. Profit exceeded the 23.2 billion-rupee median of 45 analyst estimates compiled by Bloomberg.

The Indian currency fell 8.6 percent in the April-June period, its biggest drop in seven quarters, helping cut the cost of India’s software services to overseas buyers. Infosys’s share of revenue from North America rose from the quarter ended March to 61 percent as it won orders from customers in the U.S. including a $49.5 million contract from the District of Columbia to develop a health-benefit exchange.

Sales Beat

Infosys surged 11 percent, the most since Jan. 11, to 2,804. 20 rupees at the close in Mumbai trading. The stock was the best performer on the 30-company S&P BSE Sensex and the biggest contributor to the benchmark’s 1.4 percent increase. Larger competitor Tata Consultancy Services Ltd. climbed 2.9 percent and third-ranked Wipro Ltd. rose 3.2 percent.

Sales climbed to 112.7 billion rupees from 96.2 billion rupees after the software-services provider won seven contracts worth between $50 million and $100 million. That exceeded the 109.9 billion-rupee median of 48 analyst estimates.

“Despite facing an uncertain macro environment, changing regulatory regime and a volatile currency environment, we have done well,” Chief Executive Officer S.D. Shibulal said in the statement. The company is “cautiously optimistic” about the rest of the year, he said.

Lodestone Contribution

Profit was also boosted by the first income contribution from Lodestone Holding AG, the Swiss management consulting company that Infosys acquired for 330 million Swiss francs ($348 million) in October. The business posted $1.88 million profit on revenue of $90.7 million, Infosys said.

“Consulting and package implementation had a great quarter,” Jesse Hulsing, an analyst at Pacific Crest Securities LLC, said in an interview on BTV India. “They’ve been focused on winning deals, even if it’s at the expense of margins. They’re shifting toward grabbing as many of these big operations-focused deals as possible.”

Spending on IT services worldwide is estimated to climb 2.2 percent this year, up from 2 percent in 2012, Gartner said July 2. The Stamford, Connecticut-based research company had in March forecast a 4.5 percent increase in 2013.

Top offshore information technology service providers are predicted to post “double-digit” quarterly sales growth as a recovery in the U.S. and in financial services stokes demand, according to Anurag Rana, an analyst at Bloomberg Industries. Tata Consultancy Services, India’s largest software exporter, is estimated by analysts to report this month a 14 percent jump in first-quarter profit.

Infosys, which designs and builds software programs, maintains computers and provides IT and outsourcing services for customers including the District of Columbia and RWE Supply & Trading, added 66 clients last quarter, the company said.

Immigration Bill

The software company hasn’t faced any adverse impact from proposed visa restrictions in U.S. immigration legislation, Shibulal told reporters today.

“The immigration bill has not had any impact on the deal pipeline,” the chief executive said. “There is a lot of energy and enthusiasm right now.”

Among the various changes in the proposed immigration law that has been passed by the Senate is a measure to restrict companies with a U.S.-based staff comprised of visa holders in excess of 15 percent from placing those employees at domestic client locations.

This rule “really just shuts you off from the entire business,” Infosys’s Chief Financial Officer Rajiv Bansal said at the Sanford C. Bernstein Strategic Decisions Conference on May 31.

Accenture’s Forecast

Larger competitor Accenture Plc last month forecast sales that trailed analysts’ estimates and said customers were slowing the pace and level of spending and deferring short-term contracts. Billionaire co-founder N.R. Narayana Murthy, who returned as executive chairman last month to help revive growth, had said June 15 that sales recovery may be painful and take at least 36 months.

“Discretionary spending has gone up, including at Lodestone, giving us some momentum in that space,” Shibulal said today.

Tata Consultancy Services will report earnings on July 18. The Mumbai-based company’s first-quarter profit is expected to rise to 37.5 billion rupees, according to the median of 37 analysts’ estimates compiled by Bloomberg.

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