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Cognizant Q3 net up 11.8%, cuts revenue guidance signalling deepening IT sector crisis

New York: IT services firm Cognizant today reported 11.8 percent rise in net profit to $444.4 million in the July-September quarter, but cut its annual revenue forecast for the third straight time this year.

FP photo

FP photo

Besides, it also disclosed that it has identified "potentially improper payments" worth $5 million being made for company-owned facilities in India and that certain members of its senior management may have been "aware" or "participated" in matters under probe.

The US-based firm, which posted 8.4 percent jump in revenues to $3.45 billion in the September quarter, met its guidance of $3.43-3.47 billion topline for the third quarter.

It said it expects full-year revenue to be between $13.47 billion and $13.53 billion, compared to a revenue of $12.41 billion in 2015. This translates to an annual growth of 8.5-9 percent.

Cognizant -- which follows a January-December financial year -- had predicted revenue growth between 10-14 percent at the beginning of the year.

The cut in revenue forecast by the company reinforces the deepening crisis in the Indian IT sector. Earlier, IT services majors Tata Consultancy Services and Infosys had also flagged off weakness in revenue visibility on account of various global headwinds, including Brexit worries. Both companies reported lower earnings for the July-September quarter.

Infosys, the second-largest player in India's $150 billion-plus software services outsourcing industry, had also reduced its revenue growth forecast to between 8 percent and 9 percent in constant currency terms for the current financial year due to lower client spending.

While software body Nasscom had earlier forecast the industry's export revenue to grow by 10-12 percent for 2016-17, it is now looking at a downward revision of the target amid global macroeconomic uncertainties and impact of Britain's exit from the European Union.

An announcement on the same is expected later this month.

Talking about the probe, Cognizant CEO Francisco DSouza on a concall said during the course of its investigation, the company found that "certain members of senior management may have been aware of or participated in the matters under investigation".

"Based on the results of the investigation to date, those who may have been involved are no longer with the company or in a senior management position," he added.

In September, Cognizant had said it was conducting an internal investigation into possible violations of the US Foreign Corrupt Practices Act amid allegations that the IT major had made "improper payments to obtain permits and building licences in India".

Updated Date: Nov 08, 2016 08:38 AM

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