Infy shares dip 12.6 on dim revenue outlook

Guidance at 8-10 in dollar terms for FY13; Stocks post biggest fall in 3 years

Written by: ENS Economic Bureau

3 min readBangaloreApr 14, 2012 01:47 AM IST First published on: Apr 14, 2012 at 01:47 AM IST

The Indian corporate results season for 2012-13 started off on a wrong note with Infosys,the countrys second largest IT company,giving out a highly disappointing revenue growth guidance of 8-10 per cent in dollar terms for 2012-13 that was below the projections of industry body Nasscom of 11-14 per cent.

The guidance sparked worries about how Indias 100-billion IT sector would fare in the face of a tightening US and emerging challenges from other Asian countries,as well as about the broader outlook for corporate profits.

Infosys share on the BSE slumped 12.61 per cent,its biggest fall in three years since May 2009,to end at Rs 2,403.30. The IT index at the Bombay Stock Exchange fell by 8.76 per cent during the day.

The IT major has predicted that its revenues will be in the range of 7.55-7.69 billion for the year. Analysts were expecting Infosys revenue growth forecast to be in the range of 12-15 per cent.

For the fourth quarter stretching from January to March,Infosys reported a 27.4 per cent year-on-year increase in consolidated net profit,exceeding market forecasts. The company posted a net profit of Rs 2,316 crore compared with Rs 1,818 crore in the corresponding period last year. Revenue was up 22.1 per cent at Rs 8,852 crore against Rs 7,250 crore a year ago,falling below analysts expectations.

Infosys CEO and MD SD Shibulal said delay in contract closures,slowdown in client spending and ramping down in certain BFSI banking,financial services and insurance accounts had hampered growth during the quarter. For Q4,Indias second largest IT company missed the lower end of its revenue guidance and failed to meet its EPS growth target for the first time.

For the full year ended March 31,net profit was up 21.88 per cent at Rs 8,316 crore against Rs 6,823 crore a year earlier. Revenue went up by 22.7 per cent to Rs 33,734 crore compared with the Rs 27,501 crore recorded last fiscal. Sequentially,Q4 saw a profit decline of 2.4 per cent,in line with analysts expectations.

Infosys officials said that it was one of the most difficult years in its history and added that it may be a company-specific issue,and not an industry trend. We had a very difficult quarter with revenues declining sequentially, said CFO V Balakrishnan. The global currency market volatility continues to be a challenge for the industry.

Shibulal said that midway through the fourth quarter,they had anticipated this challenge. He said the guidance given by Infosys was a very realistic understanding of the environment. It the guidance is a statement of facts,though it is difficult to give a guidance in such an environment. It was a bold thing do.