Infosys mulls returning cash, acquiring more firms

Infosys said this week it agreed to buy Swiss management consulting company Lodestone Holding for $352 m in its biggest acquisition

Infosys Ltd, India’s second- largest software exporter, might consider returning money to shareholders and making acquisitions to utilise the biggest amount of cash among outsourcers in the country.

“We will look at both,” Co-Chairman S Gopalakrishnan said in an interview with Bloomberg Television from Tianjin, China. “Periodically, we have been returning some of the cash through special dividends. And, we will also look at acquisitions, but we don’t want to do an acquisition for an acquisition’s sake.”

The Bangalore-based company said earlier this week it agreed to buy Swiss management consulting company Lodestone Holding AG for 330 million Swiss francs ($352 million) in its biggest acquisition. The purchase may help Infosys meet its goal of securing a third of its revenue from consulting and systems integration work amid rising competition in outsourcing from Tata Consultancy Services (TCS) and International Business Machines Corp.

Infosys had Rs206 billion ($3.7 billion) in cash and cash equivalents as of June 30, according to a company statement — the most among Indian software developers. Mumbai-based Tata Consul-tancy, India’s biggest software exporter, had Rs96 billion in cash and short-term investments at the end of June, according to data compiled by Bloomberg.

Infosys paid its shareholders “special cash” once every two years since at least 2004, according to data compiled by Bloomberg. The company paid out Rs12.50 a share in 2004, Rs15 in 2006, Rs20 in 2008 and Rs10 in April, in addition to its normal dividends, according to data compiled by Bloomberg.

The company’s shares rose 0.4 per cent to Rs2,539.80 as of 10:13am in Mumbai trading. The stock has declined 7.8 per cent this year, the fourth-worst among the 30 shares in the benchmark Sensitive Index.

Revenue growth in dollars might slow to six to eight per cent in the year ending March, Gopalakrishnan said. Comp-arable sales increased 16 per cent a year earlier. India’s information technology services and outsourcing industry will expand at least 11 per cent this year, according to a forecast by the National Association of Software & Services Comp-anies.

“The US is on the way to recovery, or getting used to the environment,” he said. “But definitely Europe, financial services as an industry vertical — these are the areas where there is a slowdown, clearly.”