Infosys turns more cautious, says near-term performance to be choppy

Written by fe Bureau | Bangalore | Updated: Mar 13 2014, 16:50pm hrs
Infosys SDShibulalCEO SD Shibulal said the decline in momentum during the quarter may result in revenue to be near the lower end of Infosys' guidance.
Infosys, Indias second-largest IT services exporter, has turned even more cautious on the external business environment and remarked that its near-term performance is going to be choppy with slowdown returning back into the key markets of the US and Europe. In an investor call hosted by Barclays on Wednesday, Infosys CEO SD Shibulal said, At a broad level we are seeing slowdown with unanticipated rampdowns and some cancellation of our projects.

The Infosys CEO firmed up this view following extensive meeting with their clients after the Davos meet in January this year. In Davos there was a sense of confidence but later meeting with clients, to my mind it has come down, he said.

Infosys has provided an annual revenue growth guidance of 11.5-12% in US dollar terms for FY14, which was raised from the earlier level of 9-10%.

Shibulal said, The decline in momentum during the quarter may result in our revenue to be near the lower end of our guidance. He further added that the performance in the fourth quarter of FY14 will set the base for their growth guidance in FY15.

According to Shibulal, the overall business environment has revealed a mixed picture with some sectors showing uptrend while others putting a cap on their spending. In the financial services, majority of clients are looking at reducing costs and channeling the savings into the areas of regulatory compliance and risk-related measures. In the manufacturing sector, automobile, aerospace and industrial segments are stable but hi-tech is facing certain headwinds due to reduced PC sales leading to an overall cut in capex spending.

Shibulal said the retail & CPG sector has been sluggish over the two months due to aggressive promotions and discounts during the holiday season, putting pressure on their bottomlines.

Many of the above mentioned factors have led to recent slowdown and will impact spending. This will at least continue into early part of FY15, the Infosys CEO said.

Infosys executive chairman NR Narayana Murthy said they were taking all the necessary steps towards the aspiration of becoming desirable from the perspective of every stakeholder.

Under Murthy, Infosys has undertaken certain deep rooted changes in the areas of optimising its cost structure, improving the sales effectiveness and measuring individual productivity. The IT major has received certain benefits by cutting down on its employee costs with the operating margin raising by 1.5% to reach 25% at the end of third quarter of FY14.

Though, Murthy has provided a three-year framework to reach the level of a desirable Infosys, he expects the early results to be visible from the first quarter of FY16 fiscal.

IT giant to hire up to 350 B-school grads overseas

Infosys will be hiring around 250 to 350 business school graduates and undergraduates in the US, Europe and Australia to give a further boost to its sales and marketing activities. During the investor call with Barclays, Infosys chairman NR Narayana Murthy said that they need more sales people to beat the pavement in order to bag the large outsourcing projects. Besides these overseas locations, Infosys has already made 18 offers to business school graduates in India. Infosys has renewed its thrust on sales effectiveness and plans to add more resources into this department with a focus on hiring from the local markets.