Infosys gets thumbs up from Moody's

Moody's Investors Service Wednesday assigned an A3 local currency issuer rating to Infosys based on the IT major's "internationally diverse revenue base and strong financial profile". Infosys' A3 rating reflects a "degree of insulation from the domestic economy as well as a level of fundamental strength", the rating agency said.

"Moody's Investors Service has assigned an A3 local currency issuer rating to Infosys Limited. The rating outlook is stable," it said in a statement.

It pointed out that the Bengaluru-based company's revenue is well diversified geographically, even though the top line is skewed towards the developed markets in North America and Europe that comprised 84.3 per cent of consolidated revenues for the June 2018 quarter.

"The company's industry-leading profitability and its solid balance sheet -- with large cash and liquid investments and the fact that it is debt-free -- constitute another core strength underlying the A3 rating," Moody's Vice President and Senior Credit Officer Kaustubh Chaubal said.

Moody's noted that Infosys remains exposed to evolving new regulations in key markets, such as changes in immigration laws in the US, that will drive up costs and strain profitability.

Coupled with factors like increasing competition from Indian and global peers, there could be pressure on profitability, it added.

"As such, fast-changing regulations and Infosys' ability to promptly address them, while maintaining growth and preserving profitability, will remain a key rating sensitivity," it said.

Moody's added that it expects Infosys to maintain its financial prudence and finance any potential M&As from internally generated cash flow only.

"The rating underscores the company's strategic direction of helping our clients navigate the next in their journey," Infosys CFO MD Ranganath said in a separate statement.

This is reflective of the company's robust financial position, healthy cash flow and industry-leading financial performance, he added.

Infosys has an existing rating of A- from Standard & Poor's (S&P's) Ratings Service. 

"With Moody's and S&P's ratings, Infosys will now enjoy dual investment grade ratings which are higher than India's sovereign ratings from both the above agencies," Infosys noted in its statement.