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Infosys revises forecast on upbeat client demand

BENGALURU/NEW DELHI (Reuters) - India’s second-largest software services exporter, Infosys Ltd, on Friday raised the low end of its revenue forecast for the year on upbeat demand for its digital services from Western clients.

An employee walks past a signage board in the Infosys campus at the Electronics City IT district in Bangalore, February 28, 2012. REUTERS/Vivek Prakash/File Photo

The Bengaluru-headquartered company said it expected revenue to grow between 9% and 10% on a constant currency basis in the year ending March 2020, compared with its previous forecast of between 8.5% and 10%.

Infosys and its Indian rivals first gained prominence by offering low-cost IT solutions to Western clients.

But as customers demand traditional services like routine infrastructure maintenance for less money, the firms are betting big on digital services such as cloud computing, big data and analytics to grow.

“Digital is becoming more and more central in terms of clients,” Chief Executive Salil Parekh told reporters in the tech hub of Bengaluru.

Revenue from digital offerings totalled 38.3% of Infosys’ overall sales in the quarter.

Brokerage Emkay Global Financial Services said it was surprised that Infosys had not raised the upper end of its revenue forecast despite strong order bookings and sales performance in the first half of the year.

On Friday, Infosys also flagged the business impact of a 15-month trade standoff between the United States and China, which has roiled financial markets and forced manufacturing firms to re-route supply chains.

“There’s obviously an ongoing impact with whatever is going on with the macro in terms of trade discussions, and potentially some impact that might have on manufacturing clients,” Parekh said, adding, however, that the company had had several “positive discussions” with clients in the telecoms, utility and energy sectors.

North America, with the key U.S. market, accounts for more than 60% percent of Infosys’ revenue.

Business from European banking and capital market clients is expected to remain weak due to Britain’s planned exit from the European Union and seasonal factors such as furloughs, Parekh said.

Consolidated net profit for the three months to end-September fell 2.2% to 40.37 billion rupees ($568.11 million), Infosys said. That matched analysts average profit estimate of 40.16 billion rupees.

Revenue from operations rose 9.8% as the company benefited from large deals worth $2.8 billion during the quarter.

Bigger rival Tata Consultancy Services, which reported second quarter earnings on Thursday, warned of a challenging second half as a slowing global economy forced many of its clients to cut back spending.

Reporting by Sankalp Phartiyal and Derek Francis; Writing by Sankalp Phartiyal; Editing by Maju Samuel and Deepa Babington