BANGALORE: Shares in Indian outsourcing giant Infosys dived yesterday after it issued a disappointing growth forecast and warned of global challenges, sparking worries about other firms in the flagship sector.
Infosys, whose earnings have traditionally been seen as a bellwether for the sector, said net profit rose 3.4 percent to Rs23.94bn ($439m) for the three months to March, slightly ahead of forecasts.
But below-expectation January-March revenues and sales projections for the coming 12 months sent the firm’s shares tumbling by more than 21 percent. “The lower-than-expected results and guidance reflects the uncertain macro environment and the pricing pressures the company is experiencing,” said Dipen Shah, head of private client research at Mumbai’s Kotak Securities.
Many of India’s IT outsourcing firms have been going through a rough stretch and they say the outlook for the industry remains difficult due to uncertainty in key US and European markets.
Infosys’ fourth-quarter revenues rose 18 percent to Rs104.54bn, undershooting forecasts of Rs107bn.
And the outsourcer, the second-largest by revenues, said its dollar-based revenue in the financial year to March 2013 would grow by six-to-10 percent, far slower than analysts’ hopes of up to 12 percent.
The company’s results, which kicked off the quarterly earnings season, showed full-year revenue of $7.39bn for the year-to-March 2013, missing its own earlier forecast of $7.45bn.
It has stopped providing quarterly guidance since October and now has ceased giving an annual earnings per share forecast—both critical data for analysts. Barclays capital research head Bhuvnesh Singh said confidence in Infosys’s guidance remains “low”. In the past year, it has missed sales targets, lost market share and seen its stock slide as US revenues decline.
Gartner India’s research manager Partha Iyengar said: “Infosys shows continued signs of stress in their overall performance.
“Continued weak guidance, even in the context of firming economic indicators globally and especially in the key US market, is a significant cause of concern.”
Infosys closed the day down 21.33 percent at Rs2,295.45.
Shares in other outsourcers also fell, with market leader TCS ending down 1.63 percent at Rs1,511.3 while another heavyweight, Wipro, down 4.72 percent lower at Rs383.30.
The results come as Infosys, which is also listed on New York’s Nasdaq, seeks to reinvent itself with a strategic overhaul to focus on higher value software and consulting services instead of labour-intensive outsourcing services.
“Growth is the biggest challenge for us and we have to get growth back, which will require us to make investments and differentiate our service offerings,” Infosys chief financial officer Rajiv Bansal said. Chief executive S D Shibulal said global economic signals remain mixed, “which is hampering clients’ ability to take quick decisions”.
AFP
