As the IT-earnings season kicks off this Friday,when Infosys announces the fourth quarter and full financial year results,the focus will be whether Indias second largest IT services exporter will continue to provide the annual guidance given the foggy visibility into client spends and sluggish demand globally.
The analyst community sees a possibility of Infosys departing even from its tradition of providing full-year revenue outlook as it has already discontinued the practice of giving quarterly projections. Morgan Stanley in its recent note said,Lack of full-year revenue,EPS guidance by Infosys for FY14 could lead to some uncertainty on results day. It is not clear to us how the market will react if Infosys discontinues its guidance policy.
According to brokerage houses,even if the company provides dollar-revenue projection for the current fiscal,growth is expected to be muted,hovering around 10% year-on-year. Often considered as an indicator of the Indian IT industrys overall performance,Infosys revenue outlook for FY14 is projected to be in low double digits. We expect it to remain conservative,10-12% full-year revenue growth in dollar terms and flat to negative on EBIT margins, said
Bhuvnesh Singh,head,India research,Barclays,adding that management is likely to be more cautious than other Indian IT companies.
During a recent analyst meet,Infosys had remarked that it will aspire to beat the guidance set out by Nasscom for the Indian IT industry. The IT-BPO trade body has come out with a forecast in the range of 12-14% for FY14.
For FY13,Infosys expects revenue to be at least $7.450 billion. During the December quarter,it revised upwards from its previous projection of $7.343 billion. The growth outlook includes $104 million revenue from Lodestone acquisition,a Swiss-based consulting firm that it acquired last year.
According to CLSA,Infosys should meet its guidance with a 4.1% sequential growth in revenues to $1,990 million with $26 million incremental from Lodestone. The brokerage house said the margins would be down by about 120 basis points sequentially,impacted by onsite wage hikes and Lodestone amortisation. For the fourth quarter ended March,brokerage Motilal Oswal estimates Infosys profit after tax (PAT) to decline 5.7% sequentially on account of higher taxation,lower operating margin and lower other income.
However,there are certain bright spots for the industry as the year 2013 is expected to better than last year. Morgan Stanley said that 2013 is building up to be better than 2012. For the first time in five years,USCIS expects to receive a sufficient number of H1B applications within a week in April compared with 3-8 months in the last few years. We believe signs of improved operating performance would be visible only in the June and September quarters.
For the January-March stretch,Dipen Shah of Kotak Securities expects top-tier IT companies to post 2-3% sequential volume growth. Apart from seasonality,sluggish discretionary spends and only a gradual improvement in decision-making has likely impacted growth. We will closely hear management comments on the potential order flows from USA as well as Europe, Shah noted.