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 80% of its free cash flows for shareholder distributions and the remaining for acquisitions. We could lower the rating on Infosys if the company's operating efficiency deteriorates, reflected in its EBITDA margins falling sustainably below 15%. This may happen if Infosys faces significant challenges from management changes and employee attrition, which affect delivery capabilities and result in the loss of major customers. We are unlikely to upgrade Infosys unless the company improves: (1) its scale of operations, aided by the stability and

...Lower IT spending and budget cuts due to the COVID-19 pandemic will result in muted growth. We estimate global information technology (IT) spending to contract by 4% in 2020, in line with our expectation of a 3.8% decline in the global GDP because of the COVID-19 pandemic. We expect demand for discretionary IT software and services to go down significantly as clients cut budgets to conserve liquidity. Moreover, downside risks are likely to persist in the coming quarters depending on the pace of recovery across industry verticals and geographic markets and risk of client bankruptcies. We now expect Infosys Ltd.'s revenues to grow 0%-1.5% in fiscal 2021 (year ending March 31), compared to 8.3% in fiscal 2020, and weaker than our earlier expectation of about 8% for the period....

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