Infosys: Tech lift

Share price of Infosys, India’s second largest software services exporter, rocketed to fresh high at Rs 955.50 on NSE, as the Bangalore-headquartered firm reporter better-than-expected earnings.

The IT major posted a net profit of Rs 4,233 crore for the quarter ended June 30, an increase from the Rs 3,798 crore recorded a year earlier for the same period. Infosys secured deals worth $1.74 billion during the period, higher than the $1.65 billion reported in the previous quarter.

The firm also benefited from the Indian rupee’s depreciation against the US dollar.

Revenues rose to Rs 23665 crore, an increase of 8.5%. Its ability to sign lucrative deals enabled it to weather the quarter with relative success.

The Bengaluru-based firm expects revenue to be flat or grow 2% on a constant currency basis and operating margins of 21%-23% for 2020-21.

This compares with a revenue growth of 9% or more in the last two years on a constant currency basis.

Infosys had not provided any projections in the March quarter, citing COVID-19-related uncertainty.

For Infosys investors the positive is the reiteration of revenue guidance growth of 0–2% (CC) for FY21.

The company’s absolute and relative performance (v/s TCS and Wipro) during the quarter is indicative of some of the investments made in the previous years now paying off.

Indian IT is at the bottom of a tech upcycle as explosion of digital activity is catalysing transformation of core, cloud adoption and build-up of digital capabilities.
Infosys is likely to be a key beneficiary in terms of recovery in IT spends in FY22.

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