Infosys outpaces TCS in Q3 growth, raises FY19 outlook

NEWDELHI: Infosys Ltd managed to grow its revenue in the third quarter at a faster pace than its larger rival, Tata Consultancy Services Ltd (TCS), even as the Bengaluru-based company agreed to pay shareholders ₹8,260 crore through a share buyback, the second successive share repurchase in as many years.

Significantly, Infosys raised its full-year revenue outlook to 8.5-9% in constant currency terms from the earlier 6-8%, though the company’s profitability took a hit, after Mumbai-based TCS too saw a contraction in operating margin.

The Infosys board on Friday approved a share buyback for up to ₹800 a piece, which will cost the company around ₹8,260 crore. This is the second share buyback after the company returned ₹13,000 crore through its first share buyback completed in December 2017.

Infosys also declared a special dividend of ₹4 per equity share and fixed January 25 as record date for the special dividend and 28 January as the payment date.

In constant currency terms, Infosys’s third quarter revenue rose 2.7% from the preceding three months.

Currency fluctuations, however, took some sheen off the company’s growth as dollar revenue increased at a slower pace of 2.2% to $2.98 billion in the quarter ended 31 December.

“With increased client relevance, we saw double digit (10.1%) year-on-year growth in Q3 on a constant currency basis,” said Salil Parekh, managing director and chief executive offi- cer of Infosys. “We also had another strong quarter in our digital business with 33.1% growth and large deals at $1.57 billion which gives us confidence entering 2019.” he said.

TCS, which declared its results on Thursday, reported a 1.8% sequential rise in revenue in constant currency terms and 0.67% increase in dollar terms.

However, year-on-year, TCS’S 12.1% revenue growth in constant currency terms and 9.7% dollar revenue growth is higher than Infosys’s 10.1% constant currency and 8.4% dollar revenue growth. Infosys’s net profit declined 29.6% to ₹3,610 crore for the third quarter ended December 31, 2018, against a net profit of ₹5,129 crore a year ago.

Operating margin stood at 22.6%, 110 basis points narrower than the 23.7% in the July-september period.

A Bloomberg survey of 20 analysts had estimated a net profit of ₹4,151.6 crore ($596.92 million) on Value of deal wins net sales of ₹21,294 crore ($3.05 billion), for the company.

Parekh, who has completed a year as chief executive officer after taking over the position as the second non-founder of Infosys in January 2018, assuaged concerns of risks related with macroeconomic slowdown in the financial year beginning April. “I’m delighted at the way the year has gone off,” he said.

“Infosys surprises positively with strong top-line growth for the quarter, though margin performance misses 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 expectation. However, it will support the stock performance in medium term,” said Sanjeev Hota, an analyst at brokerage Sharekhan Ltd.

Infosys’s shares ended at ₹683.70, up 0.58%, on BSE on Friday. The earnings were announced after market hours.