Infosys Shares Gain as Sales Rise at Fastest Pace in Two Years
(Bloomberg) -- Infosys Ltd.’s shares climbed after the Indian software exporter reported stronger-than-expected net income and sales as investments in higher-margin digital services and automation begin paying off.
Asia’s second-largest exporter of software services reported net income of 41.1 billion rupees ($558 million) in the September quarter. That compared with the 40.5 billion-rupee average estimate. Revenue climbed 17.3 percent to 206.1 billion rupees, its fastest pace since the three months ended March 2016, while operating profit margin was unchanged from the preceding quarter. Its shares surged as much as 3.8 percent.
Chief Executive Officer Salil Parekh has focused on stabilizing the company after a tumultuous 2017, when public wrangles between its board and co-founders culminated in the dramatic exit of the well-regarded Vishal Sikka. Parekh said in a statement Tuesday that he was delighted with the broad-based growth across all business segments and geographies. He flagged large deal wins at over $2 billion during the quarter.
“Revenue beat was impressive, which, coupled with strong deal win and net headcount addition, points to a strong demand environment,” Morgan Stanley analysts Parag Gupta and Gaurav Rateria wrote in a note on Wednesday. “The key positives were large deal wins of $2 billion (highest ever) and strongest net hiring in the past 12 quarters.”
Infosys also reaffirmed its projection for 6 to 8 percent revenue growth in the fiscal year ending March.
The benefits of a weaker rupee were “offset by wage revision for senior management, and by investments in sales transformation and digital competencies,” Kotak Securities wrote in a research note ahead of the results.
The company reported results days after larger rival Tata Consultancy Services Ltd. posted numbers in line with expectations. India’s IT services industry is dealing with a technology transition as clients move toward automation and visa curbs hamper its ability to base talent in the key U.S. market.
The gains in Infosys’ shares Wednesday pushed their increase this year to more than 38 percent.
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