The second quarter results of Infosys released on Thursday met Street expectations because of large deal wins and strong performance of the digital business.

The country’s second-largest IT services firm posted a consolidated net profit of Rs 6,021 crore, a rise of 11 per cent over Rs 5,421 crore in the corresponding period of the previous year.

Bangalore-based Infosys also announced a share buyback worth Rs 9,300 crore and an interim dividend of Rs 16.5 per share, which will cost Rs 6,940 crore.

Infosys also raised the full year revenue guidance at the lower end of the band. It now expects revenues to show a growth of 15-16 per cent against the earlier forecast of 14-16 per cent.

The EBIT margin guidance was narrowed down to 21-22 per cent from 21-23 per cent.

“We continue to see good traction (in terms of deal wins),” said Salil Parekh, chief executive officer and managing director of Infosys.

“We also see some caution in hi-tech and telecom besides mortgage and financial services.

“Keeping both the positive and macro factors we have decided to make our guidance narrower at the higher end of the band we had,” said Parekh.

Infosys’s rivals had also issued similarly cautious outlooks earlier this week, due to the challenging macro-environment and fears of an economic slowdown in their major markets of the US and Europe.

Larger rival TCS had said clients are taking longer to decide on bigger deals, while smaller rival Wipro gave a weak outlook for the current quarter.

During the quarter, Infosys’s revenues in rupee terms showed a rise of 23 per cent at Rs 36,538 crore against Rs 29,602 crore a year ago.

Revenues in dollar terms also came in line with estimates when it grew to $4555 million from $3,998 million.

A big factor behind the good show was the large deal wins: it signed 27 large deals in the quarter, with the total contract value at a seven-quarter high of $2.7 billion.

With clients showing robust demand for services such as cloud, Infosys saw a 31.2 per cent growth in constant currency terms for its digital services at $2,817 million against $2,243 million a year ago. Digital services now contribute close to 61.8 per cent to its revenues.

While revenues from cloud services topped $1 billion, Infosys witnessed a good offtake in its core services which showed a constant currency growth of 3 per cent.

“This (large deal wins) is reflective of the digital and cloud capabilities that we have developed and which are highly relevant for clients’ strategic priorities. We are also seeing an acceleration in the growth trajectory of our core services and this is due to our industry-leading automation capability and shows the interest of clients towards cost optimisation. We also see this in our large deal pipeline, with a strong focus on cost reduction programmes in addition to digital transformation’’, he observed.

In verticals, while the performance of financial services, energy & hi-tech were stable on a sequential basis, there was some moderation in retail and communication.

Buyback, dividend

At its meeting on Thursday, the board of directors approved a share buyback programme.

Infosys will buy the shares from the open market, which will be extinguished, for an amount of up to Rs 3,900 crore at a price not exceeding Rs 1,850 per share.

The price is at a premium of 29 per cent to the closing price of the Infosys scrip on Wednesday. In today’s trade, the share ended flat at Rs1,419.75 before the results and buyback announcement.

This is the fourth share repurchase announced by the company. It constitutes 14.84per cent of its total paid-up capital and free reserves as on September 30, 2022 on a consolidated basis.

Under a share buyback or purchase, a company buys back its own shares from investors or shareholders. It is seen as an alternative, tax-efficient way to return money to shareholders.

Last year, the Infosys board had approved an up to Rs 9,200crore buyback plan, which commenced on June 25, 2021and ended on September 14,2021.