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Infosys (INFY) Inks New JV Deal to Broaden Its Base in Japan

Zacks Equity Research

Infosys INFY recently announced that it has formed a joint venture (JV) with Hitachi, Panasonic Corporation and Pasona to enhance its presence in Japan.

Last December, Infosys announced that under this agreement, the company will acquire 81% of Hitachi's subsidiary, Hitachi Procurement Service Co, which handles the indirect procurement of materials for Hitachi group for around 2,762 million yen.

The JV named HIPUS Co Ltd will have Hitachi, Panasonic and Pasona as its minority shareholders and be headquartered in Japan.

Rationale Behind the Deal

The JV is likely to boost business process transformation of the Japanese corporations by using next-generation digital procurement platforms for the local and global needs.

Infosys stated that its expertise in procurement methods, analytics, consulting and digital technologies, such as Robotic Process Automation (RPA) and Artificial Intelligence (AI) will be implemented into the venture.

Talking about the deal on the company’s last earnings call, management mentioned that the large manufacturing hi-tech electronics producers are coming together for the indirect procurement. The company plans to apply technology on it and make it powerful enough to generate value.

Following the JV, the company plans to target other manufacturers in Japan as it believes, the latter’s indirect procurement will be a big category of investment.

Infosys Limited Revenue (TTM)

Infosys Limited Revenue (TTM) | Infosys Limited Quote

Growth Drivers of Infosys

Infosys has been strengthening its core competencies by pursuing strategic collaborations and acquisitions. The company is benefiting from solid deal wins, geographical extensions and business segmental growth.

The company’s alliance strategy is targeted at collaborating with leading technology providers, allowing it to take advantage of the emerging technologies in a mutually beneficial and cost-competitive manner.

Recently, in a bid to solidify its mortgage servicing capabilities in Continental Europe, the company recently announced that it is entering into a strategic partnership with Amsterdam-based ABN AMRO.

Further, Al Ahli Bank of Kuwait selected Infosys’ subsidiary EdgeVerve Systems to automate its operational processes using the AssistEdge RPA platform.

Last September, Infosys formed a JV with Singapore-based Temasek to fortify its footprint in Southeast Asia.

Zacks Rank and Stocks to Consider

Currently, Infosys has a Zacks Rank #4 (Sell).

A few better-ranked stocks in the broader Computer and Technology sector are Fortinet, Inc. FTNT, eGain Corporation EGAN and Alteryx, Inc. AYX, all sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Long-term earnings growth rate for Fortinet, eGain and Alteryx is projected at 16.8%, 30% and 15.4%, respectively.

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