INFOSYS FACES SETBACK AS $1.5 BILLION CONTRACT TERMINATED AMID INDUSTRY HEADWINDS

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In a recent blow to Infosys, the company has reported the termination of a $1.5 billion contract with an undisclosed global firm, underscoring the challenging demand environment in the IT services industry. The termination comes as some clients are choosing to hold back existing projects, pointing to broader industry challenges. The contract, which Infosys had announced on September 14, aimed to provide enhanced digital experiences, modernization, and business operations services over 15 years.

According to Infosys, the global company involved has chosen to terminate the memorandum of understanding (MoU), and both parties will not be pursuing the master agreement. The unnamed firm’s identity remains undisclosed, leaving uncertainty about whether it was an existing or new client for Infosys.

This development follows the recent resignation of Infosys’ Chief Financial Officer (CFO), Nilanjan Roy, and the subsequent appointment of Jayesh Sanghrajka as the new CFO and key managerial personnel. Earlier this year, there were other significant departures from Infosys’ senior management, including the resignation of Mohit Joshi, President, and Ravi Kumar, another President, who left to join other companies.

Despite the setback, Infosys reported a 3.2 percent growth in net profit for the second quarter ending September 30, 2022. However, the company moderated its revenue guidance for the full fiscal year due to a tepid business environment characterized by low discretionary spending.

This marks the second consecutive quarter where Infosys has revised its revenue guidance downward. The company now expects a 1-2.5 percent revenue growth in constant currency terms, compared to the earlier projection of 4-7 percent. The challenging market conditions have led to caution in revenue forecasts, despite Infosys securing its highest-ever large deal total contract value (TCV) at $7.7 billion in the same quarter.

Amidst these challenges, Infosys has managed to secure some significant deals. For instance, it announced a five-year collaboration with LKQ Europe, a leading distributor of automotive aftermarket parts in Europe. Additionally, in August, Infosys expanded its collaboration with Liberty Global, entering into an initial 5-year agreement with an option to extend to 8 years. The deal is estimated at €1.5 billion over the initial 5-year term and €2.3 billion if extended to 8 years.

As Corporate India prepares to announce quarterly results for the period ending December 31, Infosys, like its peers, is expected to navigate a complex business landscape, with challenges and opportunities shaping its performance in the coming quarters.

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