LIC and Nandan Nilekani-backed stock: Company lands largest-ever TVC deal of USD 7.7 billion in Q2; LIC stake hits record high

LIC's growing interest adds another layer to the story. In the quarter ended September 2023, LIC increased its stake in the company from 8.83 per cent to 9.39 per cent.

Introduction:

The Indian stock market witnessed a roller-coaster ride during the muhurat trading session, culminating in a subsequent profit booking that saw Nifty and Sensex losing 0.42 per cent and 0.50 per cent, respectively. Despite the retreat in the frontline indices, the broader market displayed resilience, with Nifty Mid-Cap and Small-Cap indices advancing by 0.06 per cent and 0.68 per cent, respectively.

Sectoral Performance:

A closer look at the sectoral performance revealed a mixed bag, with several sectors trading in the red. Notably, Nifty IT and Nifty Financial Service sectors experienced a downturn. However, Nifty PSU Bank defied the trend, registering an impressive surge of 2.62 per cent.

Focus on Infosys:

Amidst the market fluctuations, one stock that merits attention is Infosys, a significant player in the Nifty IT index. With a weightage of 5.84% in the index, Infosys witnessed a decline of over 1 per cent in its share value on Monday. Notably, the stock has faced headwinds in the past year, showing a dip of 4.01 per cent, and a year-to-date decline of nearly 9 per cent. Furthermore, it is currently trading approximately 18 per cent below its 52-week high of Rs 1,672.60.

Financial Performance:

In the quarter ended September 2023, Infosys reported a growth of 2.3 per cent quarter-on-quarter and 2.5 per cent year-on-year in constant currency. The operating margin expanded by 40 basis points quarter-on-quarter, reaching 21.1 per cent, driven by increased utilization. However, Infosys revised its FY24 revenue growth guidance to 1-2.5 per cent year-on-year in constant currency terms, down from the previous range of 1-3.5 per cent, indicating an expectation of flat sequential growth in the coming quarters.

Strategic Insights:

An intriguing aspect of Infosys' recent performance is its reported large deal Total Contract Value (TCV) of USD 7.7 billion in Q2, marking the highest ever quarterly total. This impressive achievement is three times the average quarterly TCV of the last four quarters. The company's success in securing large deals can be attributed to market share gains in cost optimization and vendor consolidation deals. Despite a lower deal pipeline compared to the last quarter, Infosys maintains a healthy focus on cost efficiency deals.

Investor Interest:

LIC's (Life Insurance Corporation of India) growing interest in Infosys adds another layer to the story. In the quarter ended September 2023, LIC increased its stake in the company from 8.83 per cent to 9.39 per cent. This trend is consistent with LIC's continuous accumulation of Infosys shares over the last few quarters. Notably, Nandan Nilekani, a prominent figure in the tech industry, holds a 1.64 per cent stake in Infosys.

Disclaimer: The article is for informational purposes only and not investment advice.