nsucurrent.com March 24, 2018

Infosys posts better-than-expected third-quarter profit on tax deal

13 January 2018, 02:07 | Lowell Little

Infosys retains forecast, joins TCS in signalling pickup in digital services in Q3

Infosys Q3 profit jumps 38% to Rs 5129 crore on income tax reversal

On Thursday, Infosys' bigger rival and top Indian software exporter Tata Consultancy Services Ltd reported a 3.6 percent fall in net profit due to a muted performance in its financial services sector for the third quarter.

It had posted a net profit of Rs 3,708 crore in the year-ago period, as per IFRS accounting norms, Infosys said in a BSE filing.

In the December quarter, the United States, which brings 62% of Infosys's revenue, grew 0.7% sequentially, while business from Europe, which accounts for 22.2% of overall revenue, jumped 5.9%. Dollar revenue rose 1% to $2.75 billion from the preceding quarter.

In rupee terms, there was a growth of 1.3%.

In October, the company had lowered its revenue guidance for the full year ending March 31, with an expected growth of between 5.5% and 6.5% in terms of constant currency from an earlier estimate of 6.5%-8.5%.

The company bought back shares worth Rs 13,000 crores.

Infosys reported a rise in net profit of 38.3 percent from a year earlier to 51.29 billion rupees ($806 million) for the quarter to December 31, way above analysts' estimates.

In accordance with the APA, the company reversed income tax expense of $225 million (Rs1,437 crore) pertaining to previous periods, resulting in the profit increasing. The company's net profit also rose 38.3% in the third quarter of 2017-'18 compared to that in the third quarter of 2016-'17. Operating margin improved by 10 bps during the quarter at 24.3 per cent, ahead of expectations.

Prior to joining Infosys, Parekh was an executive board member of the Paris-based global consulting, technology and IT firm Capgemini for 25 years.

Infosys, announcing its first results under new CEO Salil Parekh, said its profits had been buoyed by a deal signed with the United States tax department.

"We are progressing towards stability and are well positioned to serve our clients in the new areas of demand", he said.

Chief Operating Officer Pravin Rao said increased adoption of digital offerings and new services helped stabilise price realization, and they were "able to grow client relationships across revenue categories". Sikka quit in August after three years at the helm of Infosys, a stint marked by a feud between some founders of the company, led by N.R. Narayana Murthy, and the previous board.

"Our cash generation continued to be robust during the quarter". "We successfully executed the share buyback of ₹13,000 crore in line with our capital allocation policy".

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