Infosys retains forecast, joins TCS in signalling pickup in digital services in Q3

Infosys, India’s second-biggest software services provider by revenues, retained its full-year sales forecast, after growing revenues by 1 percent for the three months ended December 31.

The Bengaluru company also signalled a pickup in the adoption of its digital solutions, joining larger rival Tata Consultancy Services in reporting this trend. Infosys will also be looking to firmly return its focus to business growth after a tumultuous year that ended with former CEO Vishal Sikka and much of his board leaving, to be replaced by Salil Parekh within months.

“We are progressing towards stability and are well positioned to serve our clients in the new areas of demand,” Parekh said in a press release, after close of Mumbai trading on Friday.

Profits for the three months ended December 31 rose to Rs 5,129 crore from Rs 3,708 crore for the year-earlier period, Infosys, which counts JP Morgan Chase, Bank of America, Citigroup, Vodafone, BP Plc and Johnson Controls among its clients, said in a press release on Friday.

The 38.3 percent jump was largely due to a $225 million (Rs 1,432 crore) tax reversal in the US, the company’s biggest market. Profit fell about 0.3 percent, excluding the one-off benefit, roughly in line with street expectations. Analysts at HDFC Securities projected profits of Rs 5,182 crore, including the tax reversal, which implies they expected Infosys to report profit growth of 1 percent, excluding the tax reversal component.

December-quarter sales rose 8 percent to $2,755 million from $2,551 million a year ago, and increased 1 percent from the previous quarter. That compares with the 0.7 percent sequential rise and 7.7 percent gain on the year-earlier period, that analysts at HDFC Securities projected.

Infosys expects to finish the year ending March 31 with revenue growth of between 5.5 percent and 6.5 percent over the previous fiscal year, the company said in its press release, retaining its October forecast.

“Increased adoption of our digital offerings and new services helped stabilise” billing rates, COO Pravin Rao said in the press release. Rao had served as interim CEO between August and January as Co-founder Nandan Nilekani, who returned to Infosys as non-executive chairman after Sikka quit, led the search for a new permanent CEO.

“My interactions with Nandan (Nilekani, the chairman) and the board led me to believe we were here to build a stronger Infosys. That confidence led me,” to make the decision to take on the CEO’s job, Parekh told reporters in a conference in Bengaluru.

On Thursday, Mumbai’s Tata Consultancy reported it signed its biggest digital services contract to date in the December quarter, at $50 million, suggesting that such services from Indian IT companies are becoming more mainstream. Third-ranked Wipro will report its earnings for the Oct-Dec period on January 19.