n Analysts peg sequential rev growth at 3-3.5%, decision on giving fiscal guidance keenly watched

Infosys is expected to extend the turnaround of its revenue trajectory as it kickstarts the earnings season by announcing its March quarter numbers on Friday. While analysts are pinning a q-o-q revenue growth of 3-3.5% for the period, the focus is likely to remain on whether the IT bellwether gives out a revenue guidance for 2013-14 after discontinuing its quarterly guidance since September 2012.

Experts believe that since in the recent past, Infosys has sounded non-committal more than once on the practice, citing macro volatility, there is a possibility that it discontinues providing even the annual estimates.

?Infosys has voiced its limitations on revenue visibility on the back of fickle global macros and that estimates may be confusing in such an environment. Hence, it may do away with giving revenue estimates for the fiscal,? said an analyst.

As per Citi, Infosys? acknowledgment of slow decision-making and changes in some of its business practices support expectations of suspension of annual guidance.

However, Jefferies, in a recent report, pointed out that Infosys managed to give a guidance even in April 2009, just after the financial crisis of 2008 and, therefore, it will continue with rendering guidance, which it stresses to be ?a statement of facts? at a particular point in time.

Meanwhile, the stock, which has come back to investor radar in 2013 and gained 26% so far, may rally further if the company manages to meet expectations of its quarterly numbers and continues to guide for steady revenue growth of the order of 10-12%. In Thursday’s trade, its shares rallied as much as R104.6, or 3.7%, to R2,917.85 on the BSE as traders priced in these expectations.

Notwithstanding the probability of further gains, many analysts believe that it may take more time than few quarters for the IT major to close in on the valuation gap it has developed with TCS, given the differential in their revenue growth.

?Even if Infosys guides for a more than 12% revenue growth for fiscal 2014, there is a possibility that TCS? recent acquisition of France’s Altis would add up to 1% to latter?s likely revenue growth of 14-15%,? said an analyst.

According to Bloomberg consensus estimates, Infosys is currently trading at 18 times its FY13 expected earnings compared to 21.6 times for TCS. The gap thus stands close to its all-time high even as the valuation difference exists since more than three years.

However, experts are increasingly getting confident about the growth-focused strategy of Infosys that prioritises growth at the expense of moderate margins in the near-term. ?Our channel checks show that Infosys has got fairly aggressive on pricing and contract structuring in order to drive growth,? said a recent JP Morgan report.