Infosys bridges gap with rivals after lucrative deal wins

By Lehar Maan and Derek Francis

BENGALURU (Reuters) - Infosys Ltd cheered investors with a forecast-beating quarterly profit and a stronger sales growth outlook, as India's second-largest software services exporter regains market share from rivals by sharpening its focus on high-margin services.

The company's strong earnings in the past few quarters has narrowed its gap with industry leader Tata Consultancy Services Ltd , which has been struggling with sluggish growth in select markets and industrial sectors.

Infosys, a bellwether for India's roughly $150 billion IT services industry, had lost ground to its rivals including TCS and Cognizant Technology Solutions Corp in the recent past, as it struggled to innovate and retain staff.

 

Under Chief Executive Vishal Sikka, brought in about one-and-a-half years ago to chart a new strategy, Infosys has been focusing on winning more lucrative digital technology and automation outsourcing contracts.

The new focus comes at a time when western clients are not looking to raise their annual IT spending budget, but the share of new technology services is expected to surge.

"Based on what we see right now, we are optimistic about our prospects in the near term. So we are raising our guidance for this financial year," Sikka told reporters.

Infosys, which counts Apple , Volkswagen and Wal-mart Stores among its clients, raised its sales growth view for the year through March 31 to 12.8-13.2 percent from the 10-12 percent guided in October.

The company also reported a 6.6 percent increase in quarterly profit to 34.65 billion rupees ($516.5 million) as it added 75 new clients and renewed some existing large contracts.

Analysts on average had expected a net profit of 33.53 billion rupees, according to data compiled by Thomson Reuters. Revenue in the quarter rose 15.3 percent to 159.02 billion rupees.

Infosys has an outsourcing deal pipeline of roughly $3 billion, its Chief Operating Officer Pravin Rao said.

VISA WOES

Indian IT firms including Infosys and Wipro send thousands of staff to work at client locations overseas, and a measure passed last month by the U.S. Congress doubling the cost of sponsoring workers is a concern for the sector.

Indian IT industry lobby group the National Association of Software and Service Companies (Nasscom) estimates local IT firms would incur an extra $400 million a year in costs due to the spike in visa fees.

Firms are exploring various options to cushion its impact.

"Local hiring, we are working on some advanced ways to do better collaboration across borders. Not just because of visa (fee increase), but we believe that technology is within our reach. We call it visa independent... model," Sikka said.

Shares in Infosys ended 4.6 percent higher on the day, after having risen as much as 5.3 percent earlier, while the broader Mumbai market index <.NSEI> fell 0.3 percent.

($1 = 67.0900 Indian rupees)

(Reporting by Lehar Maan and Derek Francis; Writing by Devidutta Tripathy and Sumeet Chatterjee; Editing by Muralikumar Anantharaman)