Infosys Q3 profit up 38 per cent; to unveil strategic priorities by April

BENGALURU: Infosys Ltd, India's second- largest IT services exporter, today posted over 38 per cent jump in third quarter net profit after it got a one-time tax benefit from US operations.

Salil Parekh, Infosys' new chief executive officer, who took over last week, maintained the sales growth forecast and said he will lay out strategic priorities for the company by April.

Its net profit for the October-December quarter, at Rs 5,129 crore or Rs 22.53 per share, was 38.3 per cent higher than Rs 3,708 crore in the year-ago period.

While sales rose by a mere 3 per cent to Rs 17,794 crore, it got USD 225 million from tax-provision reversals by the US.

The conclusion of the Advance Pricing Agreement with US authorities led to the reversal of income tax expense provision of Rs 1,432 crore, which had a positive impact on the consolidated basic earnings per share in the quarter by about Rs 6.29.

The third quarter earnings announcement was first under Parekh who came in after a bitter boardroom tussle that led to Vishal Sikka's resignation.

Parekh said the company is "progressing towards stability" and is well positioned to serve clients in the new areas of demand.

Pledging to keep steering Infosys away from a traditionally labour-intensive model, he told reporters that his immediate priorities would include connecting with employees and clients to build a "roadmap for future" which will be announced in April.

Stressing that each of its clients is facing digital disruption, Parekh said that this has created an opportunity for the company.

He said that building on strategy initiated by Infosys Chairman Nandan Nilekani, the company is conducting a review structured around four dimensions -- new market opportunities, client relationships, people and service offering portfolio.

"Over the next three months, I am meeting with several of our clients, employees, partners...working with our leadership team and the Board to test the assumption and the approach and then build a comprehensive view along with four critical elements," Parekh said.

Revenue growth projections, which were cut last year after the boardroom upheaval, were kept unchanged at 5.5-6.5 per cent in constant currency for 2017-18 and 6.5-7.5 per cent in US dollar terms.

Sales in 2016-17 had risen by 9.7 per cent.

Addressing the media, Nilekani said the company conducted an "exhaustive" shareholder consultation and received feedback on areas where it was doing well as also where it could do better.

On the expansion of the Board, Nilekani said it will take "those decision at an appropriate time".

Asked how long will he remain at the helm of Infosys, Nilekani, who is the non executive chairman, said: "I will be there for as long as required, and not a day longer." He said that the new CEO had brought stability to Infosys. "It has already settled down, it is absolutely stable and I think we have moved very quickly".

Parekh, 53, a former board member at French rival Capgemini, has his task cut out. He has to navigate the company growth while also balancing relations with powerful founders led by former chairman N R Narayana Murthy, who had attacked Sikka-led management for giving generous exit packages to some executives.

Parekh said: "We are progressing towards stability and are well positioned to serve our clients in the new areas of demand." On a sequential basis, the company's net profit rose 37.6 per cent, while revenue was up 1.3 per cent in rupee terms.

In US dollar terms, Infosys' net profit grew to USD 796 million during the quarter under review, while revenues were at USD 2.7 billion from the year-ago period.

The company's total headcount stood at 2.01 lakh at the end of the December quarter.

Infosys said Rajesh K Murthy, President, has resigned from the company citing personal reasons and will be there till this month end.

The results were announced after market hours.

"Infosys needs to continue its growth trajectory and reinforce confidence with its clients as recent abrupt changes might have dented confidence," Gartner India Research Director DD Mishra said.

He added that the IT industry as a whole is going through challenging times as it transforms into a new digital era of automation and smart machines.

"Infosys needs to watch out for a shift in buying powers, enterprise speed of change and disruptive competitors who will continue to challenge the top line and bottom line growth in the near term," Mishra said.