* Shareholder payout plans come after pressure from founders
* Firm has been accused of corporate governance lapses
* Reports small rise in quarterly net profit
* CEO: $20 bln revenue target by 2020 "incredibly difficult
(Adds CEO comment on revenue target)
By Sankalp Phartiyal and Arnab Paul
MUMBAI/BENGALURU, April 13 Infosys set
a $2 billion cash return to shareholders and appointed an
independent director as co-chairman, moves that may placate a
group of founders and former executives who have criticised
India's second-biggest software services exporter.
Some founders and former executives of the Bengaluru-based
company have publicly accused its board of governance lapses and
had urged it to reward shareholders through a share buyback like
rival Tata Consultancy Services did with a $2.4 billion
buyback announced in February.
Infosys said on Thursday it would return up to 130 billion
rupees ($2.02 billion) to shareholders in the fiscal year ending
March 2018, adding the manner of the payout will be decided by
the board. It also appointed independent director Ravi
Venkatesan as co-chairman of the board.
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
"Infosys' balance sheet remains very strong and can still
accommodate proper investment," said Young. "The new appointee
hopefully allays governance, expertise concerns."
Shares in Infosys were down 3.7 percent at 0812 GMT,
however, as the market had been hoping for a larger payout and a
Infosys said it expects revenue to grow 6.5 percent to 8.5
percent in constant currency terms during 2017-18.
"It is a challenging environment out there," CEO Vishal
Sikka said at a press conference, adding that the outlook was
tempered by the company's most recent quarterly performance.
Infosys is also likely to struggle to reach its ambitious
$20 billion revenue target by 2020, as the $150 billion Indian
software service sector has been hit by cautious client spending
due to a wave of protectionism under the new U.S.
"With the performance that we have seen in the last few
quarters it was already a difficult thing and now it's an
incredibly difficult thing," Sikka said.
The United States is the largest market for Indian software
service companies and an Indian industry lobby group in 2016 cut
its forecast for the sector's growth in the year to March due to
Infosys reported a small rise in consolidated net profit to
36.03 billion rupees ($559.5 million) in the three months to
March, from 35.97 billion rupees in the year-ago quarter.
Analysts, on average, had expected a consolidated profit of
35.67 billion rupees, according to Thomson Reuters data.
Quarterly revenue grew 3.4 percent year-on-year to 171.20
"It's a lackluster kind of result and guidance," said Dipen
Shah, head of private client group research at Kotak Securities.
The company said it was positive on its financial services
business, while retail was likely to remain volatile during the
"In U.S. particularly we've seen a couple of rate hikes and
an easing of regulatory pressure so we expect some of the spend
to come back later in the year, in terms of discretionary spend.
So we remain fairly confident on the financial services," said
Pravin Rao, the company's chief operating officer.
($1 = 64.3975 Indian rupees)
(Additional reporting by Anshuman Daga in SINGAPORE, Anya
George Tharakan and Tanvi Mehta in BENGALURU; Editing by Edwina
Gibbs and Muralikumar Anantharaman)