Infosys Q1 net at Rs 2,290 crore, below estimates; stock tanks 10%

Infosys, India’s second largest information technology company, has cut its sales forecast for this fiscal to 5 per cent, much lower than 8-10 per cent it had predicted at the end of the March quarter. The sharp revision in outlook, which comes amid worries that clients will reduce spending on outsourcing services, disappointed investors.


Infosys sees its revenue in dollar terms rising 5 per cent to $7.34 billion in the year to March 2013. Most analysts were expecting Infosys to trim its sale growth outlook to 6-8 per cent.

Shares of Infosys, valued at about $25.5 billion, fell 10.2 per cent to Rs 2,219 after the results, dragging the Nifty down 1.3 per cent and the Nifty IT index to 5.5 per cent.The company on Thursday reported a net profit of Rs 2,290 crore in the June quarter against the street expectation of Rs 2,483 crore. It reported Rs 9,616 crore in revenue, against market expectations of Rs 9,715.2 crore. Infosys had reported sales of Rs 8,852 crore and Rs 2,316 crore in net profit in the January to March quarter."This was on the cards because the US economy is weakening and the company's growth momentum was weakening. The two have conspired to create a storm," Saurabh Mukherjea, head of equities at Ambit Capital toldInfosys, which is battling allegations of visa fraud in the US where it earns most of its revenue, reported a marginal decline in dollar revenue at $1752 million in the June quarter against $1771 million in the previous quarter. This is the most important number for analysts because IT companies earn in dollar terms.

Indian IT companies are feeling the pain of an economic slowdown in the US and Europe as the American economy fails to pick up steam and the euro-zone flounders in a quicksand of debt.

The company has stopped putting out earnings forecast on a quarterly basis, a sign of the increasing uncertainty in global environment."It's no surprise. The best is over for Indian IT companies... These results are a preview of what we may see from Wipro, Cognizant," Trip Chowdhary of Global Equities Research told NDTV Profit.

Management speak

“Our focus on Infosys 3.0 and building tomorrow’s enterprise coupled with disciplined execution will help us deliver high-quality growth, despite challenges seen in the global economic situation resulting in slower IT spends by large corporations,” S D Shibulal, CEO and managing director of Infosys said.



“Global currency volatility continues to be a big challenge for the industry,” said V. Balakrishnan, Member of the Board and Chief Financial Officer. “We are making the right investments balancing the short-term needs with long-term opportunities,” he added.

Here are the results in numbers:

1) Infosys reported a sequential decline of 2.7 per cent in volume growth.
2) Ebitda margins, a key measure of profitability, declined 190 basis points sequentially to 28 per cent against estimates of 30 per cent.
3) The company has forecast FY13 earnings per share (EPS) at Rs 166.5, which is lower than estimates. For the June quarter, EPS stood at Rs 40.06 per share against Rs 40.54 per share in the previous quarter. Infosys beat its EPS guidance of Rs 36.89 per share. The US dollar EPS stood at $0.73 per share against $0.81 per share (meets guidance).
4) It added 51 new clients in the June quarter.
5) The attrition rate rose marginally to 14.9 per cent from 14.7 per cent (quarter-on-quarter).
6) Consolidated employee cost stood at Rs 5,260 crore against Rs 4,245 crore (QoQ).
7) The company lost $13 million on account of currency fluctuations in the June quarter.
8) Infosys reported pricing decline of 3.7 per cent for the June quarter.
9) BFSI revenue has improved 8.7 per cent at Rs 3,302 crore against Rs 3,037 crore.
10) It reported a marginal decline of 0.4 per cent in constant currency terms.

(With inputs from Thompson Reuters)