* Tightens FY revenue growth target to 9-10 pct from 6-10
* Shares end 4.7 pct higher after touching highest since
* Company cites sharper focus on large contracts
By Harichandan Arakali
BANGALORE, Oct 11 Infosys Ltd's
refocus on big-ticket contracts since the return of its founder
has begun to pay off as India's No. 2 software services exporter
crossed $2 billion in quarterly sales for the first time and
pushed up its revenue outlook
Still, a one-off provision left Infosys reporting profit
that missed analyst estimates in its first full-quarter earnings
since Narayana Murthy came out of retirement, during which time
the industry bellwether lost ground to rivals such as Tata
Infosys shares, which are often highly volatile after
results statements, on Friday ended up a relatively muted 4.7
percent at 3274.50 rupees after touching their highest since
Under Executive Chairman Murthy, Infosys is increasing
investment in sales and doing a better job at winning large
outsourcing contracts to which it is devoting more senior
"There's still a lot of work to be done, but they're turning
around," said Equirus Securities Chief Executive Bhavin Shah.
"I think they're seeing deal wins, client traction and
revenue momentum. I'm sure Murthy is spending a lot of energy in
sort of assuring clients that Infosys means business."
Murthy has said Infosys sacrificed growth in favour of
higher-margin proprietary software and consulting. Instead, he
is refocusing on large, plain-vanilla IT outsourcing contracts
that have long been the industry staple.
Infosys pointed to Australia, its third-biggest market, as
evidence of recent success, winning all six of the deals it
competed for above $75 million in value over the last two
Globally, Infosys won five large contracts worth a combined
$450 million in the September quarter.
"Our focus on proactively creating large deals has led to
significantly better pipeline," CEO S.D. Shibulal told analysts.
VISA PROBE BITES
Bangalore-based Infosys recorded consolidated net profit for
the three months to Sept. 30 of 24.07 billion rupees ($391
million) compared with 23.69 billion rupees in the same period a
The result missed the 26.26 billion rupees average of
analyst estimates according to Thomson Reuters I/B/E/S,
primarily because it set aside 2.19 billion rupees as it seeks a
"civil resolution" to an investigation in the United States over
the past use of temporary employment visas.
Infosys also said it expects its operating margin to be
steady at about 23.5 percent if the rupee is stable.
India's IT services industry, which generates most of its
revenue in U.S. dollars, benefits from rupee weakness
because companies earn more rupees for every dollar a client
Infosys, one of the few Indian companies to give guidance,
narrowed the range of its fiscal year revenue growth outlook to
9-10 percent from 6-10 percent.
Several analysts called that conservative. The National
Association of Software and Services Companies forecast for the
sector is 12-14 percent.
Ambit Capital analyst Ankur Rudra, who has long had a sell
rating on the stock, called the guidance "inexplicably
conservative" and "disappointingly low."
"We continue to remain cautious on the pace of the recovery
in demand for offshore IT services and expect industry
performance to be (led) by faster growing peers," such as TCS,
U.S.-based Cognizant Technology Solutions Corp and HCL
Technologies Ltd, Rudra wrote in a note.