BENGALURU (Reuters) - Software services company Infosys Ltd reported a larger-than-expected quarterly profit but trimmed its revenue forecast for the year, sending its U.S.-listed shares tumbling as much as 5 percent in early trade on Tuesday.
The results are the first since Vishal Sikka quit as chief executive in August after a long row between the board and the company founders that frazzled investors and saw the return of Nandan Nilekani, a co-founder and a former CEO, as chairman.
Nilekani had said at the time he would prioritise finding a CEO, reconstituting the board and shaping future strategy. The company said the search for a new CEO is “progressing well” and it plans to stay the course on its future strategy.
“The management team along with the board of directors undertook a comprehensive review of our strategy ... Our current strategy continues to be relevant and we just need to accelerate the execution,” said U.B. Pravin Rao, interim CEO.
The Infosys board also reaffirmed that an internal investigation into alleged improprieties related to the acquisition of automation firm Panaya found no evidence of wrongdoing.
The company also said it would not make all findings of the investigation public. This drew criticism from some, who felt it leaves investors in the dark, especially as the founders, led by Narayana Murthy, had faulted Sikka and former chair R. Seshasayee for not releasing all the findings previously.
“Investors will be left wondering as to the reasons why there was a need for a change of board in August,” said Shriram Subramanian, founder of shareholder advisory firm InGovern.
Sikka, Seshasayee and two others resigned from the board in August, ending a protracted battle with the founders, who accused the board of corporate governance lapses.
Days after their exit, Murthy, in a conference call with investors, expressed concerns about the previous board’s corporate governance practices, including the “excessive” severance paid to a former finance chief.
“I stand by every question on poor governance raised in my speech to Infosys investors,” Murthy said in an emailed statement late on Tuesday after the results.
“The fact remains that none of these questions have been answered by the Infosys board with the transparency it deserves,” he said, expressing disappointment.
Infosys cut its expected full-year revenue growth to 5.5 percent-6.5 percent in constant currency, compared with its previous guidance of a 6.5-8.5 percent increase.
Profit after tax rose 3.3 percent to 37.26 billion rupees ($573 million) in the second quarter, beating the average analysts’ estimate of 35.23 billion rupees, according to Thomson Reuters data.
Bengaluru-based Infosys said its revenue from operations rose 1.5 percent to 175.67 billion rupees in the second quarter. Revenue from the financial services segment rose marginally to 47.18 billion rupees.
Harit Shah, research analyst at Reliance Securities, said he had expected a trimming in the revenue growth forecast but had hoped for a smaller cut.
“The churn of top management and these board-related issues could have meant an impact in terms of clients freezing their programmes,” said Shah.
Infosys’s ADRs were trading down 3.5 percent at 1550 GMT after earlier dipping nearly 5 percent.
($1 = 65.0225 Indian rupees)
Additional reporting by Jessica Kuruthukulangara; Writing by Aditi Shah; Editing by Muralikumar Anantharaman, Susan Fenton and Adrian Croft