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Infosys Offers Conservative Guidance, Promises $2 Billion For Shareholders This Year

Infosys expects revenue in constant currency terms to rise 6.5 percent to 8.5 percent. 



Workmen prepare an electronic screen at the Infosys Ltd. popup venue ahead of the World Economic Forum (WEF) in Davos. (Photographer: Jason Alden/Bloomberg)
Workmen prepare an electronic screen at the Infosys Ltd. popup venue ahead of the World Economic Forum (WEF) in Davos. (Photographer: Jason Alden/Bloomberg)

Infosys Ltd. promised to return up to Rs 13,000 crore to shareholders even as India’s second largest software services company forecast a lower-than-expected growth for the ongoing financial year.

The company’s consolidated profit fell 2.8 percent sequentially to Rs 3,603 crore in the three months ended March. The profit beat the Rs 3,570-crore consensus estimate of analysts tracked by Bloomberg.

The quarter was weaker than what the company expected, Vishal Sikka, chief executive officer of Infosys, said in a press conference in Bengaluru. “The environment is challenging, with increasing digitisation, commoditisation of services, and geopolitical concerns.”

The company said it will now distribute as much as 70 percent of annual free cash flow to shareholders, compared to 50 percent earlier. Infosys is the fourth tech company to announce a record payout to shareholders, following Cognizant, Tata Consultancy Services Ltd. and HCL Technologies Ltd.

Shares of Infosys fell as much as 4.36 percent after the company announced the numbers for the fourth quarter of 2016-17.

It’s revenue stood at Rs 17,120 crore in the three months ended March compared to Rs 17,273 crore in the previous quarter, according to its financial statement on the exchanges.

Revenue in dollar terms rose 0.7 percent to $2,569 million for the quarter. Annual dollar revenue rose 7.4 percent to $10,208 million, falling within the company’s guidance of 7.2 percent to 7.6 percent growth. This guidance was slashed thrice over the last three quarters.

The company’s earnings before interest and tax fell 2.8 percent to Rs 4,212 crore from Rs 4,334 crore in the October to December quarter. EBIT margin contracted to 24.6 percent from 25.1 percent.

Infosys Offers Conservative Guidance, Promises $2 Billion For Shareholders This Year

Conservative Guidance

Infosys expects revenue in constant currency terms to rise between 6.5 percent and 8.5 percent in the the financial year 2017-18. Analysts from IDFC Securities, Jefferies India and Kotak Institutional Equities, among others, had expected the company to forecast 7 percent to 9 percent growth. In dollar terms, Infosys expects sales to increase between 6.1 percent to 8.1 percent.

The guidance is in line with expectations after taking into account the changes in the U.S. H-1B visa regulations, Abhishek Shindadkar, a senior analyst at Equirus Securities, told BloombergQuint.

Conservatism of guidance this time was expected since last year they had guided for double digits and had to lower them throughout the year. So this is probably a good start.
Abhishek Shindadkar, Senior Analyst, Equirus Securities

Infosys’ revenue grew 8.3 percent in constant currency terms and 7.4 percent in dollar terms in the financial year 2016-17. In January, the company had projected dollar sales growth in the 8.4 to 8.8 percent range.

$2 Billion Promise

Infosys said it will return as much as Rs 13,000 crore ($2 billion) to shareholders via a dividend or stock buyback, or both, the company said in a notification to the exchanges. It also announced a dividend of Rs 14.75 per share for the financial year 2016-17.

New Co-Chairman

The board of the information technology firm appointed Ravi Venkatesan as co-chairman. Venkatesan, who has been serving as an independent director on the company's board, is also the chairman of government-owned Bank of Baroda.

The current chairman R Seshasayee and the rest of the board had come under criticism from co-founders including NR Narayana Murthy in the last couple of months. Murthy had criticised salaries given to the top management, and Infosys' board composition.