Infosys will pay Rs 13,000 cr to shareholders; profit falls 2.8%

The company had posted a consolidated net profit of Rs 3,708 crore in the October-December quarter of FY17.

India's second-largest software exporter Infosys on Thursday posted a consolidated net profit of Rs 3,603 crore for the January-March quarter of FY17.

The company had posted a consolidated net profit of Rs 3,708 crore in the October-December quarter of FY17.

While profit rose marginally year-on-year to Rs 3,603 crore, the firm's revenue increased 3.44 per cent year-on-year (YoY) to Rs 17,120 crore. However, consolidated revenue of the company declined 0.89 per cent quarter-on-quarter (QoQ) compared with Rs 17,273 crore in the previous quarter.

The IT major will also pay up Rs 13,000 crore as dividend/share buyback - 20 per cent net worth of Infosys. The board announced dividend of Rs 14.75 per share.

The company expects its 2017-18 revenue to grow between 6.1 per cent and 8.1 per cent in dollar terms and 6.5-8.5 per cent in constant currency terms.

On a sequential basis, Infosys' net profit fell 2.8 per cent while revenue declined 0.9 per cent.

Infosys CEO Vishal Sikka said, "Unanticipated execution challenges and distractions in a seasonally soft quarter affected our overall performance."

He added: "Looking ahead, it is imperative that we increase our resilience to the dynamics of our environment and we remain resolute in executing our strategy, path to transform Infosys and drive long term value for all stakeholders."

In US dollars, Infosys net profit was up 1.8 per cent at $543 million for the March quarter while revenue grew 5 per cent to USD 2.5 billion.

The company expects 2017-18 revenue growth at 6.5 - 8.5 per cent in constant currency, 6.1 - 8.1 per cent in US dollar terms.

Infosys board also appointed Independent Director Ravi Venkatesan as co-Chairman of the company.

"The Board has identified an amount of up to Rs 13,000 crore (USD 2 billion) to be paid out to shareholders during Financial Year 2018, in such manner (including by way of dividend and/or share buyback), to be decided by the Board, subject to applicable laws and requisite approvals, if any," Infosys said in a statement.

The Bengaluru-based firm had recently adopted a new Articles of Association that included a provision for buyback.

"Our capital allocation policy is aimed at balancing the strategic and operational needs of the company as well as enhancing shareholder returns," Infosys CFO MD Ranganath said.

Infosys, which has cash reserve of about USD 6 billion on its books, has been under pressure from investors to utilise the amount either through share buyback or generous dividend.

The pressure had grown further after Infosys industry peers Cognizant and Tata Consultancy Services announced their mega buyback offers worth USD 3.4 billion and Rs 16,000 crore, respectively, to return surplus cash to shareholders.

Smaller peer, HCL Technologies has also approved a buyback of up to 3.50 crore shares worth Rs 3,500 crore.

Infosys said its current policy is to pay dividends of up to 50 per cent of post-tax profits of a financial year.

"Effective from financial year 2018, the company expects to payout up to 70 per cent of the free cash flow of the corresponding financial year in such manner (including by way of dividend and/or share buyback) as may be decided by the Board," it added.

Share buybacks typically improve earnings per share and return surplus cash to shareholders while also supporting share price during period of sluggish market condition.

Two of Infosys former CFOs -- T V Mohandas Pai and V Balakrishnan -- had recently exhorted institutional investors to raise questions about the huge cash pile on the company's books, saying investors have an obligation to protect their investment.

Infosys reported a slightly higher-than-expected fourth-quarter profit as the company added more clients in the $100 million-plus category.

The company, in the spotlight recently due to differences between founders and board members over governance issues, has beaten analysts' profit estimates in seven of the last nine quarters.