In today’s results, Infosys unlikely to buck weak trend of TCS, Wipro

Vishal Sikka-led Infosys is expected to see a 60-70-basis-point (bps) decline in its operating profit margin as it closes the fourth quarter of FY15 hit by cross-currency movements. At the same time, speculation is mounting that the IT major is close to announcing another acquisition in the digital domain.

Infosys, which will announce its results on Friday in Chennai, is not expected to buck the trend, as witnessed in the quarterly performances of TCS and Wipro, which recorded flattish revenue growth and tepid profits.

Brokerage house Kotak Institutional Equities in its report on Infosys said, “We estimate sequential constant currency revenue growth of 2% and flat revenues in US dollar terms. EBIT margins are likely to decline due to absence of provision write-back (30 bps) that aided margins in 3QFY15 and cross-currency headwinds. We forecast 60-bps qoq decline.”

Infosys reported an operating profit margin of 26.7% at the end of third quarter of FY15, which was a sequential increase of 60 bps. BNP Paribas said, “We expect a 70 bps quarter-on-quarter margin decline, i.e., expect the EBIT margin to fall back to the 24-26% guided range.”

On the possible second acquisition by Infosys under Sikka, it is understood that the company may fork out $100-150 million for this small technology company with presence in the digital domain. The name and geographic location of this firm could not be ascertained but it is estimated to have revenues of around $30 million.

Another aspect to watch out for is its revenue growth guidance for FY16. The IT major has guided for revenue growth in the range of 7-9% in dollar terms for FY15 and brokerages estimate that it is unlikely to overshoot this target.

Goldman Sachs in its report said, “On FY16 revenue growth guidance, we expect them to guide for 8-10% US dollars revenue growth, tad lower than street estimates for FY16 growth.”

Infosys Technologies Limited

TATA Consultancy Services ( TCS )

Wipro Technologies (Wipro Ltd)