Infosys Surges After Raising Annual Sales Forecast: Mumbai Mover

Infosys Ltd., India’s second-largest software exporter, surged to the highest level in 2 1/2 years in Mumbai trading after raising its sales forecast as economic recovery spurs European clients to boost spending on services.

The stock climbed 4.7 percent to 3,274.50 rupees, the highest close since April 2011. Revenue in dollar terms will increase by 9 percent to 10 percent in the year ending March, Infosys said today. The Bangalore-based company previously projected growth of 6 percent to 10 percent.

Sales momentum has strengthened with Infosys adding clients including Toyota Motor Corp.’s European unit that are seeking to pare costs and boost efficiency by outsourcing work. Worldwide spending on information technology services will grow 3.4 percent this year, researcher IDC said on Aug. 5. The Indian company is also benefiting from the Indian rupee’s drop.

“Infosys is indicating they have a clearer picture of the road ahead and it looks good thanks to resurgent economies in the U.S. and Europe,” said Harit Shah, a Mumbai-based analyst with Nirmal Bang Equities Ltd. “The rupee’s depreciation has been icing on the cake. There’s good upside moving forward.”

The software provider also reported earnings, with second-quarter net income rising 1.6 percent to 24.1 billion rupees ($394 million) in the three months ended September. That missed the 26.6 billion-rupee median of 46 analysts’ estimates compiled by Bloomberg, due to a 2.2 billion-rupee provision for “visa-related matters,” according to the statement.

U.S. Visas

Infosys is in talks with the U.S. attorney’s office regarding the government’s probe into the company’s compliance with visa laws. Infosys has allocated $35 million for a possible settlement and legal fees, it said.

Sales in the three months ended Sept. 30 climbed to 129.7 billion rupees from 98.6 billion rupees. That exceeded the 127.3 billion-rupee median of analysts’ estimates.

Infosys options tumbled as the stock’s move disappointed traders who had bet the shares would swing 12 percent by month-end. All nine of the most-traded contracts today retreated, with October 3,100 puts tumbling 85 percent. Infosys shares moved by an average 11 percent after its last eight quarterly reports.

The rupee declined 5.2 percent against the dollar in the July-September period helping pare the cost of India’s software-services exports to overseas buyers. The rupee’s fall coincided with increased demand from Infosys’s clients -- in the U.S. by 3.9 percent versus the previous quarter, and in Europe 5.2 percent. The two markets accounted for about 85 percent of the company’s revenue, according to the statement.

Hedging Plan

“We have an active hedging program to minimize” the impact of currency volatility, Chief Financial Officer Rajiv Bansal said. “We will continue our focus on optimizing costs and enhancing the efficiency of our operations.”

The company’s forecast also lifted shares of its competitors. Cognizant Technology Solutions Corp., the Teaneck, New Jersey-based company that pays more than a quarter of its costs in rupees, jumped 5.5 percent to a record $88.85 at the close in New York. In Mumbai, Tata Consultancy Services Ltd. rose 2 percent to 2,122.05 rupees, also a record.

Infosys also increased its rupee-based sales forecast to a range of 21 percent to 22 percent from 13 percent to 17 percent.

Revenue from India rose to 2.4 percent of its total in the quarter ended September, from 1.6 percent a year earlier.

Infosys co-founder, N.R. Narayana Murthy, who returned as executive chairman in June to help revive growth, has said a sales recovery could take three years.

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