Infosys Q3 profit beats estimates, shares surge 13 percent

Bangalore: Infosys Ltd, India's No.2 software services provider, posted a stronger-than-expected quarterly profit and raised its annual revenue forecast after its client base expanded and the firm signed more deals, sending its shares 13 percent higher.

Infosys, whose customers include Bank of America Corp and BT Group Plc, said profit for the three months ended December 31 was 23.69 billion rupees versus 23.7 billion rupees a year earlier. That compares with the average estimate of 21 billion rupees in a poll of 16 analysts, according to Thomson Reuters.

The Bangalore-based company unexpectedly raised its sales forecast for the year ending March 31 to at least $7.45 billion, including $104 million in additional revenue following its acquisition of Switzerland-based consultancy Lodestone Holdings. That would be a rise of 6.6 percent from a year earlier, compared with a previous forecast for a 5 percent increase.

"We continue to gain confidence from a strong pipeline of large deals," CEO SD Shibulal said in a statement on Friday. "We remain cautiously optimistic about the January-March quarter." With about 60 percent of its business in the United States, Infosys is vulnerable to swings in US corporate sentiment and has been hit hard by project deferrals. The company is also particularly exposed to discretionary spending in the financial sector. Its premium pricing has also put off some customers.

Analysts had expected Infosys to trim its annual sales growth to as low as 3.3 percent after the company warned last month that US clients had cut back on projects and delayed signing big deals. In October-December, Infosys said revenue rose 12 percent to Rs 104.24 billion from Rs 93 billion a year earlier. That compares with analyst estimates of Rs 96.8 billion. The firm added 53 clients during the quarter.

"The language of the guidance is slightly better this time with the company saying they have a strong pipeline. This is something we are hearing after a long time," said Jagannadham Thunuguntla, strategist at SMC Global Securities, New Delhi.

Meanwhile shares in Infosys, valued at about $25 billion, rose more than 13 percent after the earnings report, headed for their biggest gain since May 2009. The Nifty rose 0.4 percent and the sector index climbed 7.4 percent. "The market was slightly predatory, given that the last two times the company has disappointed, but this time the organic guidance is better... which I think will be taken positively," said Rikesh Parikh, vice-president of markets strategy and equities, Motilal Oswal Securities in Mumbai.

In 2012, shares in Infosys slumped 16.2 percent, underperforming rival Tata Consultancy Services Ltd, which rose 8.2 percent. Tata Consultancy is expected to report a profit gain of about 12 percent in the quarter, according to Thomson Reuters data, on Monday.

India's $100 billion-a-year IT and back-office outsourcing sector earns about three-quarters of its revenues from customers in the United States and Europe, and faces intense competition from global rivals including IBM, Accenture and Cap Gemini.