India’s Infosys makes slight Q1 profit increase

BENGALURU/MUMBAI — Infosys Ltd, India’s No. 2 software services exporter, eked out a slight rise in first-quarter profit, although the outlook for more earnings gains remains cloudy due to higher labor costs and unfavorable currency rates.

India’s more than $150-billion software services sector faces headwinds in its biggest market, the United States, as clients hold back technology spending amid concerns about President Donald Trump’s review of a visa program for highly-skilled workers.

Net profit rose 1.4% to 34.8 billion rupees ($540 million) in the April-June quarter from a year earlier, just a tad above expectations.

Infosys retained its annual revenue outlook at between 6.5% and 8.5% growth on a constant currency basis.

But Mumbai brokerage Emkay said in a client note that the company’s failure to lift its revenue guidance indicated first-quarter pricing gains were not sustainable and profitability could see a “downtick” in the coming quarter on lower growth, wage hikes and rupee appreciation.

After Trump targeted outsourcing firms, Infosys said in May it plans to hire 10,000 US workers in the next two years — a move that will likely lead to higher labor costs. It is also due to give annual salary increases to employees this month.

“We’ll be announcing the compensation hikes and we are also ramping up the US talent model,” Finance Chief M.D. Ranganath told reporters.

The Indian rupee has also risen 5.4% against the US dollar this year, adding to the woes of outsourcers who bill for the majority of their services in foreign currencies.

But Infosys fared better than bigger rival Tata Consultancy Services which missed analysts’ expectations on Thursday with a 6% drop in first-quarter profit. —