Bengaluru, 13 July, 2019: IT behemoth Infosys Ltd Friday posted better-than-expected 5.3 per cent rise in its June quarter net profit as it bagged more orders, and raised revenue growth forecast for the current fiscal to 8.5-10 per cent range.

The country’s No 2 IT services firm posted a net profit of Rs 3,802 crore, or Rs 8.83 per share, in April-June as compared to Rs 3,612 crore, or Rs 8.31 a share, in the same period of the previous fiscal, the company said.

Notably, Infosys has announced an enhanced capital allocation policy wherein it will return 85 per cent of free cash flow cumulatively over a five-year period to shareholders via buyback and dividends.

Revenue from operations rose 14 per cent to Rs 21,803 crore. The Bengaluru-based company secured USD 2.7 billion – its highest ever in a quarter – in large deals, mostly in dominant North American and European markets.

The company has raised its revenue growth guidance for the fiscal to March 31, 2020 to be between 8.5 per cent and 10 per cent, from the 7.5 per cent to 9.5 per cent range it had forecast earlier.

Ahead of the announcement of results, Infosys shares closed 0.87 per cent higher at Rs 727.10 on the BSE on Friday.

Commenting on the results, Infosys CEO and Managing Director Salil Parekh said, “We had a strong start to FY’20 with constant currency growth accelerating to 12.4 per cent on year over year basis and digital revenue growth of 41.9 per cent. This was achieved through our consistent client focus and investments which have strengthened our client relationships”.

Attributing the performance to a “broad-based growth”, Parekh added that the company has consequently raised the revenue guidance for this fiscal from 7.5-9.5 per cent to 8.5-10 per cent in constant currency terms.

In US dollars terms, Infosys net profit grew to USD 546 million in the June quarter from USD 534 million in the year-ago period, while revenues rose to USD 3.13 billion as against USD 2.83 billion.

“We had a good quarter as we continue to leverage our digital navigation framework to help our clients build and nurture their live enterprise. Large deal TCV was highest ever at USD 2.7 billion. Segment growth was robust with all large regions and most verticals growing at double digits y-o-y in constant currency,” Infosys COO Pravin Rao said.

Infosys’ larger rival Tata Consultancy Services (TCS) posted a 10.8 per cent rise in June quarter profits, while its revenue grew 11.4 per cent to Rs 38,172 crore during the quarter. The company had said its focus will be on maintaining double-digit revenue growth in the rest of the year.

Wipro and HCL Technologies are slated to announce their results in the coming weeks.

Infosys Friday said its digital revenues in the June quarter was at about USD 1.1 billion (35.7 per cent of total revenues), having grown 41.9 per cent year-on-year.

Its operating margin for the quarter was at 20.5 per cent, and the company expects to maintain the FY20 operating margin range of 21-23 per cent.

Infosys added 906 people (net) during the quarter to take its total headcount to 2,29,029 at the end of June 2019. The attrition (annualised consolidated) was at 23.4 per cent.

The company said there was no impact of attrition on its deliverables and that historically, the first quarter of the fiscal has a higher level of attrition.

Infosys has initiated a number of measures for employee engagement, investment in career opportunities and enrichment of experience for employees, the top management said, conceding that the attrition was definitely higher than what the company wanted.

Talking about the revamped capital return policy, Infosys Chief Financial Officer Nilanjan Roy said, “Continuing our objective of improving shareholder returns, we have revised our capital allocation policy upwards”.

Effective from the financial year 2019-20, Infosys expects to return about 85 per cent of its free cash flow cumulatively over a five-year period through a combination of semi-annual dividends, buyback and/or special dividends, it said.

Infosys added that it is on track towards completing its previously announced share buyback of Rs 8,260 crore and has bought back shares worth Rs 5,934 crore till date.

The development comes at a time when the government has proposed that listed companies be liable to pay additional tax at 20 per cent in case of share buyback as is the case currently for unlisted companies.

Roy said it was “too premature” to comment on the issue but added that the company is going to continue its existing buyback programme.

Infosys noted that its current policy entails paying up to 70 per cent of the free cash flow annually by way of dividend and/or buyback.

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