Infosys said it will buy back 10.32 crore shares, or 2.36%, for no more than Rs 800 per share – 17% higher than the Friday’s closing price of Rs 683.70 per share on the BSE. Photo: Reuters
Infosys shares today surged as much as 3% to Rs 705 after India’s second-largest software exporter by value raised its sales forecast for the year ending March citing a “healthy pipeline” of orders. Bangalore-headquartered Infosys, which announced third-quarter earnings after market hours on Friday, predicts revenue will expand as much as 9% from an earlier target of 8%. “Infosys delivered a strong positive surprise on revenue growth,” said Sudheer Guntupalli, a Mumbai-based technology analyst at Ambit Capital Pvt., who has a buy rating on the stock. “Strong large deal win momentum” seems to be driving the confidence behind this upgrade.
Infosys said it will buy back 10.32 crore shares, or 2.36%, for no more than Rs 800 per share – 17% higher than the Friday’s closing price of Rs 683.70 per share on the BSE. This is the second share buyback in the company’s history. The first was in December 2017. A company can hold a share repurchase programme only once a year. Infosys also declared a special dividend of Rs 4 per share.
Payment of special dividend would entail a payout of about Rs 2,107 crore and another Rs 8,260 crore would be spent on share buyback. The board of Infosys re-appointed Kiran Mazumdar-Shaw as the lead independent director for a second term from April 1, 2019, to March 22, 2023.
CEO Salil Parekh, in a post-earnings press conference, said the confidence to raise revenue forecast comes from the fact that individual segments are growing well.
“Also, our core services is growing. And that’s where we make a difference in the market,” he said. “We have an extremely competitive offer and we are putting a lot of artificial intelligence into it. That’s attractive for our clients.” The share of digital services like cloud computing, automation and analytics have been increasing in the company’s revenue share and growth returned to legacy businesses like financial services. Digital services now contribute 31.5% to its revenue.
For the quarter to the end of December, Infosys reported a 29.6% fall in net profit to Rs 3,609 crore, compared with the Rs 4,131 crore average of 25 analyst estimates compiled by Refinitiv Eikon. A year earlier, Infosys made a profit of Rs 5,129 crore, helped by tax benefits from the company’s deal with the U.S. Internal Revenue Service, it said in a statement.
On Thursday, Infosys’ bigger rival Tata Consultancy Services Ltd reported a record quarterly profit for October-December.
Infosys said revenue from operations in the quarter rose 20.3% year-on-year to Rs 21,400 crore in what is usually a seasonally weak period for Indian IT firms due to a long holiday season in the West.
The company’s operating margin declined 110 basis points to 22.6% even though it retained the margin guidance in the band of 22-24%.
Infosys said it was “no longer highly probable” that the sale of its units Kallidus & Skava and Panaya would be completed by the end of March. Total expenses in the quarter surged over 26% to Rs 17,021 crore, which included an additional depreciation and amortization charge of $12 million and a reduction of $65 million in the carrying value for its Skava units.
Sanjeev Hota, AVP Research at Sharekhan by BNP Paribas, Infosys’ performance surprised positively with strong top-line growth for the quarter, though margin performance missed the mark. “Increase in revenue guidance and better exit rate for FY19 provides comfort on double digit growth in FY20. Buyback quantum seems to be below than expectation, however, will support the stock performance in medium term,” he added.
-With Agency Inputs