Infosys cuts revenue guidance

Infosys cuts revenue guidance

Mumbai, Oct. 14: Infosys today slashed its annual revenue growth forecast for the second time this year amid cautious client behaviour and pricing pressures, signalling that the scenario continues to remain lacklustre for the domestic IT services industry at least for the next six months.

The Bangalore-based company, however, beat analyst estimates to post a 6 per cent growth in net profit at Rs 3,606 crore during the second quarter ended September 30 compared with Rs 3,398 crore in the year-ago period.

Analysts had expected profits in the region of around Rs 3,500 crore.

Its topline was also ahead of expectations with revenues in rupee terms rising 3.1 per cent sequentially to Rs 17,310 crore; in dollar terms, revenues grew 3.5 per cent sequentially to $2587 million.

Operating margins also showed a growth of 80 basis points to 24.9 per cent over the preceding quarter.

However, Infosys said revenues were expected to grow 8-9 per cent in constant currency this fiscal, the second time this year it is lowering its annual forecast. The company had in July lowered the projection to 10.5-12 per cent.

"Considering our performance in the first half of the year and the near-term uncertain business outlook, we are revising our revenue guidance" Vishal Sikka, CEO of Infosys, said.

The company had cautioned earlier that it was experiencing headwinds in the second quarter.

In an interaction with analysts at its Pune campus in August, the Infosys management had warned of a moderation in spending by some clients after Britain voted to leave the European Union.

Infosys had felt the impact of Brexit when RBS called off its plans to set up a separate bank in the UK. The company had been appointed the programme technology partner in the project.

Speaking to analysts at a conference call, Sikka said during the quarter, Infosys saw signs of cautious client behaviour apart from a decline in the overall pricing environment.

"Over the last couple of weeks, several of our peers have also indicated a softer business environment leading to a more cautious outlook for 2016-17. After considering our performance in the first half and the near term business outlook based on the visibility and our assessment at this point of time, we expect our revenue growth (to be between 8-9 per cent),'' he said.

The Infosys CEO said the lowering of guidance was not due to structural factors.

"What is having an impact in the structural level is the decline in the overall pricing environment. We have continued to see pricing pressure and my sense is that it is only going to intensify and that is the structural thing that we must address through a combination of automation and innovation,'' he said.

The lowering of the guidance led to the shares of the company dropping over 5 per cent to an intra-day low of Rs 996.15 on the BSE. However, the counter managed to recoup some of its losses and end at Rs 1,027.40, a loss of 2.34 per cent.

Infosys added 12,717 people (at gross level) and 2,779 employees (on net basis) from the June quarter. The attrition rate was at 20 per cent in the September quarter.