Infosys, India’s second-largest IT services exporter, is likely to drive down its revenue guidance further, a report from brokerage house CLSA has said. The IT major has already slashed its revenue growth forecast to 5%, from the earlier projection of 8-10%. So the CLSA prediction may come as a rude shock to investors.
In a report dated August 23, analysts Nimish Joshi and Arati Mishra wrote, ?Some up-tick in financial services has already been assumed in the 5% yoy growth guidance for FY13. Notwithstanding Infosys’ new-found aggression on deals, we believe that FY13 revenue guidance will likely need another downward revision.?
The CLSA report said that Infosys was becoming more flexible in its pricing structure and contract negotiations. ?Limited compromise on terms & conditions was the key internal constraint in large deal bids at Infosy. Infosys indicated that this is being addressed through greater flexibility on contracts and aggression on pricing,” the report said.
CLSA said that Infosys was opening up to more traditional application development & maintenance (ADM) deals and was also showing greater intent on acquisitions and captive buyouts in the traditional business lines which it has avoided due to stringent internal margin thresholds. The bigger challenge for Infosys today lies in its utilisation of human resources where it is estimated that over 40,000 of its employees are on the bench leading to lower utilisation levels and higher attrition rates.
Though the company has not provided any wage hike for its employees, it has witnessed a steep increase in costs of onshore employees especially in US.
In an interview with FE, Infosys CEO S D Shibulal had said, ?We are definitely operating in a challenging environment…The revision in guidance was based on three factors: currency, pricing and business. This volatility is likely to see a very protracted recovery.?