Infosys Ltd forecast full-year sales growth that missed analyst
expectations by a margin of up to 50 percent, dimming investor hopes
that India's No.2 software services firm will soon start reaping the
benefits of its strategic revamp.
Infosys forecast on Friday dollar
revenue to grow between 6 percent and 10 percent for the fiscal year
that began this month. That was less than analysts' estimates for
revenue growth of as much as 12 percent, and slower than a gain of 12 to
14 percent expected for the overall industry. Shares of Infosys tumbled
as much as about 20 percent.
The company, which had been losing
market share for about two years to industry leader Tata Consultancy
Services Ltd (TCS) and smaller rivals like HCL Technologies Ltd, has cut
its pace of hiring to the slowest in three years with the aim of
boosting profitability. Yet Infosys said on Friday that margins will be
under pressure in the near term.
"The (revenue) forecast looks
quite conservative, which is a concern. Fiscal 2013 was also not very
good for Infosys," said K.K. Mital, CEO for portfolio management
services at Globe Capital in New Delhi. "This looks like
company-specific problem. Even mid-cap companies are expected to perform
better than this."
Infosys, once seen as a trend-setter for
India's $108 billion outsourcing services industry, has turned in a
string of disappointing results, except for in January when it surprised
the market by raising its outlook.
The rough patch was caused in
part by the challenge of implementing its "Infosys 3.0" push for revenue
through the development of its own software platforms, to differentiate
its services from those of its competitors, amid sluggish demand from
clients in its core western markets.
In a sign that this strategy
has yet to deliver, its products and platforms services contributed 5.7
percent of its overall revenue in the March quarter, down from 6.2
percent a year earlier.
Infosys lost more than $5 billion in
market value after the forecast was announced, with its shares on track
to post their biggest single-day percentage fall since April 2003.
net profit for the fiscal fourth quarter ended March 31 was 23.9
billion rupees, compared with 23.16 billion a year earlier. Revenue for
the quarter rose 18 percent to 104.5 billion rupees.
with an average estimate of 23 billion rupees in a survey of 18
analysts by Thomson Reuters I/B/E/S. Revenue was estimated to grow 21
percent to 107 billion rupees.
Infosys said it expected margins
and pricing for its services to be under pressure in the short term,
after reporting that billing rates fell 0.7 percent in the fourth
quarter from the December quarter.
Analysts also said the absence
of an outlook for earnings per share from the company, which stopped
giving quarterly forecasts last year, was a reflection of uncertainty.
The company added 56 clients in the quarter, taking the total to 798, compared with an addition of 52 last year.
are confident, considering the deal wins in the last one year and the
wins in the recent past, we feel that we are well positioned for the
next year," Rajiv Bansal, chief financial officer, told reporters.
Infosys also said it would set aside up to $100 million to invest in products, platforms and solutions ideas.
of this volatility we also understand that growth is the biggest
challenge for us and that we've to get the growth back, which will
require some investment, accelerating investments in the marketplace,
also differentiate our service offering," Bansal said.
said it added 1,059 employees during the quarter, the slowest pace of
additions in three years, in what could be a sign of the times in which
India's IT outsourcers are looking to trim down on the hordes of
Infosys is the first in the sector to report
quarterly earnings. TCS is expected to report a 22 percent rise in
fourth-quarter net profit on Wednesday, while third-ranked Wipro is seen
posting a 15 percent rise on Friday, according to analysts.
0725 GMT, Infosys shares were trading down 19.7 percent. Shares of Wipro
fell 4.8 percent and TCS lost 3 percent. The broader market was down
© Thomson Reuters 2013