Infosys Ltd.

The stable outlook on Infosys reflects our expectation that the company will maintain its good competitive position, generate healthy cash flows, and have zero external debt over the next 12-24 months. This is despite Infosys' plan to use 70% of its free cash flows for shareholder distributions and the remaining for acquisitions and capital expenditure. We believe a downgrade is unlikely in the next 12-24 months, given Infosys' stable business and zero external debt. However, we may lower the rating if Infosys' operating efficiency deteriorates, resulting in EBITDA margins falling sustainably below 15%. This may happen if the company faces significant challenges from management changes and employee attrition, which affect delivery capabilities and result in the loss of major customers.

...Infosys Ltd.'s diverse service offerings and solid client relationships should support revenue growth.We believe Infosys will continue to benefit from its strong client relationships as it scales up its digital service offerings. This should support the company's revenue growth over the next few years even as demand for traditional outsourcing services witness headwinds. We attribute Infosys' good market position to its record of good operating performance through business cycles. Infosys benefits from its broad information technology (IT) service offerings ranging from traditional application and infrastructure management services to product engineering and management, to new age artificial intelligence (AI)-based analytics and big data. Such diversity, along with the company's strong clientele of over 1,200 across more than 10 key business segments including financial services, retail, communication, energy as of Sept. 30, 2018, provides stability in earnings even through changing discretionary...

Full Report