Infosys Q2 net profit rises 11%, announces Rs 9,300-cr share buyback

The company's consolidated revenue from operations rose 23% to Rs 36,538 crore in Q2FY23; floor price for share buyback set at Rs 1,850 per share

India's second largest IT services company Infosys on Thursday posted better-than-expected 11 per cent rise in consolidated net profit at Rs 6,021 crore for the September quarter and announced buyback of shares worth Rs 9,300 crore.

The Bengaluru-headquartered company raised its FY23 revenue growth guidance to 15-16 per cent, pushing the forecast towards the higher end of previously-projected 14-16 per cent band, bouyed by "strong large deals pipeline" and good demand momentum despite global macroeconomic concerns.

Infosys board has also declared an interim dividend of Rs 16.50 per share. The interim dividend payout will be about Rs 6,940 crore, the company said in a statement.

The company has fixed October 28 as record date for interim dividend and November 10 as the payout date.

Infosys -- which competes with Tata Consultancy Services, Wipro, HCL Technologies on outsourcing contracts -- reported an 11 per cent year-on-year rise in consolidated net profit for the second quarter ended September 2022 at Rs 6,021 crore.

The revenue rose 23.4 per cent year-on-year to Rs 36,538 crore in the second quarter ended September.

The Q2 showing was "broad-based with all industries and geographies growing in double digits in constant currency," Salil Parekh CEO and MD of Infosys said at a briefing.

Margins expanded by 150 basis points sequentially helped by "operational rigor" and supply side pressures eased somewhat as attrition cooled off to 27.1 per cent from 28.4 per cent in June quarter.

"While concerns around the economic outlook persist, our demand pipeline is strong as clients remain confident in our ability to deliver the value they seek, both on the growth and efficiency of their businesses. This is reflected in our revised revenue guidance of 15-16 per cent for FY23", Parekh said.

The company has announced share buyback worth Rs 9,300 crore via open market route, for a price of up to Rs 1,850 per equity share. The buyback price is 30 per cent higher than the scrip closing price of Rs 1,419.7 apiece on Thursday.

Share buyback is seen as an alternative, tax-efficient way to return money to shareholders.

This is the fourth buyback announced by the company since its listing in 1993.

Last year, Infosys board had approved an up to Rs 9,200 crore buyback plan, which commenced on June 25, 2021 and ended on September 14, 2021.

Among the headline metrics, the large deal total contract value for the quarter was robust at USD 2.7 billion, in fact, the highest in the last seven quarters.

Digital space comprised 61.8 per cent of overall revenues and grew at 31.2 per cent in constant currency terms. Operating margin for the quarter increased sequentially by 140 basis points to 21.5 per cent.

However, the company has lowered the upper end of operating margin guidance and is now expecting the operating margin for FY23 in the band of 21-22 per cent as compared to 21-23 per cent cited earlier.

"While supply side challenges are gradually abating as reflected in the reducing attrition rates, they continue to exert pressure on our cost structure," Nilanjan Roy, Chief Financial Officer of the company, said.

Parekh said while the company is seeing a strong large deals' pipeline, it is watchful of the macro environment.

"We indicated that we had started seeing concerns on mortgage side, financial services and retail industry... we are seeing, this time, some concerns in high tech and telecom space in addition, more on discretionary part," Parekh said but assured that overall "the pipeline for large deals remain quite strong today".

The company is "comfortable" with its positioning in the market, even as it closely watches the macro environment and remains cautious.

On the issue of moonlighting, Parekh said Infosys does not support dual employment.

In the past, where employees were found engaging in blatant work for two specific companies raising confidentiality issues, it had "let go of them".

The Q2 scorecard of Tier-1 tech companies comes amid challenging macroeconomic scenario in crucial markets of the US and Europe, the mainstay for Indian IT industry. Storm clouds over the global economy have prompted economic commentators to flash warnings about recession risks and international market shocks.

India's largest IT services exporter TCS on Monday reported an 8.4 per cent growth for the September quarter net profit at Rs 10,431 crore, crimped by a dent in margins.

On Wednesday, HCL Technologies posted a 7 per cent rise in its consolidated net profit for the September quarter at Rs 3,489 crore, and raised the full year revenue guidance citing strong demand and deal pipeline despite macro concerns.

Meanwhile, IT services major Wipro Ltd has reported a 9.3 per cent drop in the September quarter net profit, weighed down by rising staff expenses and lower non-US earnings.

Profit attributable to equity shareholders of the company at Rs 2,659 crore in July-September was 9.27 per cent lower than Rs 2,930 crore in the year-ago period.