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BENGALURU : Infosys Ltd on Wednesday raised its annual revenue forecast as clients continued to spend heavily to digitize their processes to save costs and reach new customers, spurred by the pandemic.

India’s second-largest software services company now expects revenue to rise 14-16% in constant-currency terms from the 12-14% it forecast three months ago.

Widespread disruptions caused by the pandemic have forced companies to accelerate their digital transformation. Changes in behaviour that would have taken years to unfold have happened within months. Some of these new habits picked up during the pandemic, such as online shopping and remote working, are likely to be sticky, forcing companies to adapt quickly.

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The upgrade in sales forecast followed robust fiscal first-quarter earnings. Profit rose 22.7% in the three months ended 30 June to 5,195 crore from a year ago. Revenue grew 16.9% in constant currency to 27,896 crore. That compares with Bloomberg earnings and revenue estimates of 5,358.8 crore and 27,634.5 crore, respectively.

Dollar revenue grew 16.9% annually and 4.8% sequentially to $3.78 billion on the back of large deal wins worth a total contract value (TCV) of $2.6 billion during the quarter. Out of these large deals, 30% were net new signings. “This is the fastest growth we have seen in 10 years. We continue to gain significant market share, which is essentially organic growth, especially in the area of digital transformation. This is a clear reflection of Infosys’s resilience and client relevance," said Salil Parekh, chief executive and managing director of Infosys.

The digital business, which comprises cloud and other emerging technologies, grew 42.1% in constant currency to $2.04 billion and contributed 53.9% to the total revenues for the quarter ended June. “The demand outlook is strong and focused on digital and cloud areas such as Infosys Cobalt…and pricing remains stable," Parekh said.

“Infosys managed to maintain its growth trajectory in competitive and difficult situations. The company has been increasing its dependency on digital revenue for quite some time, which now constitutes more than half of its overall income, with healthy growth contributing to overall increase in top line," said D.D. Mishra, senior director analyst, Gartner.

The operating margin for the June quarter narrowed to 23.7% from 24.5% in the preceding quarter due to an increase in subcontracting costs and other expenses related to employee retention and hiring. Infosys retained its operating margin guidance for FY22 to be in the range of 22-24%.

Financial services and retail segments, which contribute close to half of Infosys’s revenue, grew 22.6% and 22.2% annually, respectively.

North America, the largest market for Infosys, grew 21.1% annually. Europe, the second-largest market, grew 12.2% annually.

Infosys’s voluntary attrition rate in the IT services unit rose to 13.9% from 10.9% in the preceding quarter, indicating strong demand in the industry.

Infosys plans to hire 35,000 college graduates in FY22. “As the demand for digital talent explodes, rising attrition in the industry poses a near-term challenge. We plan to meet this demand by expanding our hiring programme of college graduates," said U.B. Pravin Rao, chief operating officer, Infosys.

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