In a sign of returning confidence in the corporate results, industry analysts are factoring in more positives than negatives for the first big result of the season?Infosys?due on Tuesday. Top brokerage firms polled by FE expect the country?s second-largest IT company to offer an upward revision in its full-year guidance of revenue growth and earnings per share.
Infosys, according to them, would benefit from cross-currency movements in the past quarter the most among tier I Indian software exporters. According to a report put out by Motilal Oswal Securities, the negative margins impact is ?expected to be partly countered by higher volumes and higher-than-peer-group cross-currency impact (0.8%) on a higher Australian dollar contribution?. The brokerage firm?s India Strategy Report estimates that Infosys would raise its earnings per share guidance (EPS) for FY 2010, to Rs 103 (from its guided EPS projection of Rs 99 to Rs 100).
Among the negatives for the company are the impact of salary hikes, appreciation of the rupee and increased selling, and general administration expenses, according to industry reports.
The company is likely to outperform its projected revenues in dollar term. Brokerage firm Sharekhan?s IT earnings preview says Infosys?s Q3 revenues in dollars would be up 3.4% q-o-q to $1,194 million, compared to its guided $1,155-1,165 million.
Ebidta margins for Infosys is likely to decline close to 245 basis points on a quarterly basis and will result in 4.4% decline in net profits, according to Angel Securities. In Q3, Infosys announced mid-year salary escalations of 8% offshore and 2% onsite.
The company?s margins could also be impacted by induction of freshers, hiring of sales staff and overseas headcount addition, according to Motilal Oswal Securities.
Cross-currency movements in the third quarter were said to have boosted the dollar-term revenues of the top tier software vendors by between 0.4% and 0.8%. Infosys enjoys 5.9% contribution to its revenues from the Australian dollar, which appreciated the most ? 9.6% during the quarter ? followed by euro, which rose 4% against the dollar. The rupee appreciated 3.6% against the dollar.
Sharekhan reports a possible upward revision of dollar-term revenue guidance at 0.7% growth in FY2010 compared to the -1% to -1.3% guidance earlier. ?We maintain that Infosys would maintain its conservative approach in its guidance in terms of the demand environment and any upward revision would come on the back of outperformance of Q3 FY2010 results and favorable cross-currency movement,? Sharekhan says, while maintaining EPS guidance would be revised to Rs 101-103.