Infosys 2018 Outlook Looks Bright for Investors

Infosys Ltd (NSE:INFY) in the second quarter had posted the mixed result. Infosys in the second quarter FY 2017-18 had posted the earnings per share of 25 cents, which has beaten the analysts’ estimates for earnings per share of 24 cents.

The company has posted the revenue of $2.73 billion in the period, which missed the analysts’ expectation of $2.78 billion. INFY in the second quarter has done a TCV of $731 million, which is well ahead what the street was expecting in the range of $600-$650 million

Future Outlook

Infosys for FY18, is expecting the revenues to grow 5.5%-6.5% in constant currency and in USD terms, the revenues are expected to grow 6.5%-7.5% based on the exchange rates as of September 30th, 2017. The company has revised the guidance downwards considering the second half to be seasonally weak.

The third quarter will see two major headwinds, which are lower number of working days and furlough impact. These will affect all the verticals of the company. Some of these spend is expected to pick up from the fourth quarter itself. Further, INFY has planned to invest in Digital, Analytics, Internet of things, Cyber security etc. On the other hand, the process of searching for the new CEO has already started.

Additionally, INFY has reiterated that the operating margin will be in the range of 23% to 25%. In the second quarter, the operating margin improved due to the 30 basis point improvement in the utilization, 20 basis points improvement in the onsite mix, 30 basis points improvement in the pricing and 10 basis points improvement due to the other cost optimization measures.

Infosys Buy Back Offfer

Meanwhile, Infosys will open its share buyback offer on November 30^th, 2017. INFY will buy back 11.3 crore equity shares for Rs 13,000 crore at Rs 1,150 per share. INFY is buying back the shares at a premium of 27.8 per cent to the current price of ₹900 a share.

The investors looking for short-term profit can buy the shares in the open market and offer them in the tender offer. Further, the eligible investors can get an absolute return of 25-30 per cent (subject to short term capital gains tax) over the next four months, which is the average time taken from board approval to payout in recent tender offers, leading to an annualised return of 75-90 per cent.