Infosys To Return $2 Billion To Shareholders, Could Placate Founders
Infosys board has recently been accused of governance lapses It will give $2 billion to shareholders through dividend/share buybacks Infosys revenue guidance for current fiscal is below Street estimates
Software giant Infosys pledged Thursday to return $2 billion to shareholders this year as it reported subdued growth in profits for the fourth quarter.
The company said it would raise dividends and share buy-backs, with its stock price under pressure due to cuts in businesses' IT budgets and worries over a US visa crackdown under President Donald Trump. It also appointed independent director Ravi Venkatesan as co-chairman of the board.
Net profit in the three months to March 31 came in at Rs 3,603 crore, only marginally above the Rs 3,600 crore it reported in the same period last year.
"Unanticipated execution challenges and distractions in a seasonally soft quarter affected our overall performance," Infosys chief executive Vishal Sikka said in a statement.
Infosys shares fell by 3.86 percent after the company forecast revenue growth of between 6.5 and 8.5 percent for the current financial year, lagging analyst projections.
The $2 billion cash return to shareholders and appointment of an independent director as co-chairman, moves that may placate a group of founders, including Narayan Murthy, and former executives who have criticised India's second-biggest software services exporter.
The Infosys board has recently been accused of governance lapses and salary increases for top executives, and has been urged to reward shareholders through a share buyback like rival Tata Consultancy Services did with a $2.4 billion buyback announced in February.
Hugh Young, managing director of Aberdeen Asset Management Asia, said the payout and the new appointment were positive. Aberdeen owned Infosys shares as per latest data available as of end-February.
"Infosys' balance sheet remains very strong and can still accommodate proper investment," said Young. "The new appointee hopefully allays governance, expertise concerns."
Infosys said it expects revenue to grow 6.5 per cent to 8.5 per cent in constant currency terms during 2017-18.
Over the past few quarters, Indian software service firms have struggled, due to a wave of protectionism under the new U.S. administration.
The United States is the largest market for Indian software service companies and an Indian industry lobby group, NASSCOM, in 2016 cut its forecast for the sector's growth in the year to March due to global uncertainties.
