Infosys pledged to return ₹13,000 crore to shareholders through dividends and buybacks and appointed an independent director as co-Chairman on a day it reported tepid earnings results and lower-than-expected sales forecast.
The cash return and appointment of Ravi Venkatesan as co-Chairman are believed to be moves aimed at placating a group of founders and former executives, who criticised the Bengaluru-based company of governance lapses. They had urged it to reward shareholders through a share buyback.
Weak outlook
Infosys failed to cheer the markets with its revenue growth outlook of 6.5-8.5 per cent for the current fiscal. India’s second-largest IT services exporter ended fiscal 2017 with a growth of 8.3 per cent in constant currency terms.
The Indian IT sector has been facing global headwinds in the form of tighter H-1B scrutiny, protectionism in the US and a changing technology landscape. Ashish Chopra, IT analyst, Motilal Oswal Securities, said the guidance does not seem to suggest of any potential recovery in the first half.
Infosys recently adopted a new Articles of Association that included a provision for buyback after founder NR Narayana Murthy questioned the company’s capital allocation policy, considering that it had cash reserves of $6 billion.
Infosys’s performance has slowed considerably from the 2016 fiscal, when it seemed like it would turnaround.
Net profit for the whole year came in at ₹14,353 crore, a 6.4 per cent rise from the ₹13,491 crore it posted in the 2016 fiscal. At ₹68,484 crore, revenues were up 9.7 per cent when compared to the 2016 fiscal.
“Unanticipated execution challenges and distractions in a seasonally soft quarter affected our overall performance,” said Vishal Sikka, CEO, Infosys, adding that the external situation was different a year ago.
Sikka was referring to political developments such as Brexit and the US administration’s stance on H1-B visas as well as distractions relating to the feud with the founders.
Net profit for the March-ended quarter was ₹3,603 crore, a 2.8 per cent fall from the ₹3,708 crore it posted in the December quarter.
On a year-on-year basis, this was a 0.2 per cent increase. Similarly, revenues, which came in at ₹17,120 crore, were down 0.9 per cent from the December quarter, but up 3.4 per cent from the March 2016 quarter. Analysts had expected Infosys to post revenue growth of 1.2 per cent.
Infosys maintained its margins at 24.7 per cent in the backdrop of weak growth, but has guided for a 23-25 per cent range in the 2018 fiscal. The company added $2 billion in free operating cash flows and won deals totalling $3.4 billion in the 2017 fiscal.