Information technology major Infosys on Friday maintained its annual revenue growth outlook at a minimum of 5%, failing to cheer markets and break its spell of sluggish growth. The firm barely met street expectations with a 3.5% sequential rise in consolidated net profit for the September quarter, dragging its shares on the BSE down by 5.36%. The earnings provided a clear pointer to fact that the sector?s key markets ? the US and Europe ? were still unstable, resulting in customers keeping their budgets on a tight leash.
The biggest surprise, however, was the fact that its chief financial officer V Balakrishnan decided to step down from the post to make way for vice-president (finance) Rajiv Bansal. Balakrishnan will now drive the company’s BPO operations, product platforms including banking software Finacle and its India business operations. He is one of the three candidates tipped to take over as the next CEO, once SD Shibulal steps down.
Analysts were expecting a 150-basis points increase in the company?s guidance following its recent acquisition of Swiss consulting firm Lodestone, but the management said that was not factored in while computing the forecast. This will only reflect in its third-quarter results, company officials said. For FY13, Infosys expects revenue to be at least $7.343 billion. The software firm revised downwards its earnings per share for 2012-13 to $2.97 from $3.03 projected during the first quarter ended June.
During the June quarter, the tech major had cut its forecast down to a meagre 5% rise in dollar revenue for FY13 against an 8-10% increase set at the beginning of the financial year. The Bangalore-headquartered IT firm has put out a poor show every quarter in the last one year, disappointing markets with its muted outlook.
The 3.5% sequential rise in net profit translated into a sum of R2,369 crore compared with R2,289 crore posted in the previous quarter. The company reported a 24.3% year-on-year increase in consolidated net profit, with revenues rising 2.5% sequentially to R9,858 crore. Year-on-year revenue was up 21.7%.
Infosys, which reported a mere 2.6% sequential rise in dollar revenues of $1,797 million in the September quarter, said that it will look to changing the annual dollar revenue guidance next quarter.
?The Lodestone deal is not closed. We are still waiting for some clearance. It will enter into our guidance in the current quarter. The deal has no impact on our outlook right now. We will change our guidance next quarter,? said SD Shibulal, CEO and managing director, Infosys.
As the US and Europe struggle to establish stability amid cutbacks by consumers, leaders of the $100-billion Indian software exporting industry are beginning to feel the heat. In the last two quarters, IT firms have witnessed a drop in volume growth and some have also shown the possibility of growth missing forecasts this fiscal. The Indian IT-ITeS industry earns about 75% of its revenues from the US and European markets.
?Global economic uncertainties continue to face the industry. The environment has really not changed. It continues to be a challenge for our clients,? said Shibulal. ?We are investing in our future. While we continue to see some short-term challenges; in the long term it will be good for the company.?
?Infosys reported yet another muted quarterly result,? said Ankita Somani, analyst, Angel Broking. ?The dollar revenue grew by 2.6% quarter on quarter to $1,797 million, slightly below expectations. The major disappointing thing was the operating margin coming down by 165 basis points sequentially to 26.3%, despite the rupee rate being almost flat and no other major headwind to the margin seen.?
While announcing the Q1 earnings, Infosys, for the first time in its existence, said that will not issue a quarterly outlook due to the lack of visibility on client spending in the short term. The Infosys share slumped to finish at Rs 2,395.65 slipping by over 5%, on a day when Sensex was marginally down 0.69%.
?Costs went up this quarter, but there is no impact of the currency fluctuations on operating margin,? the company said, adding that volumes during the quarter grew 4.4% on-site, while offshore it was up 3.6%. Overall volumes during the quarter was up 3.8%.
?Pricing went down a bit on a blended basis by 0.2%. It was almost flat,? Shibulal noted.
According to Balakrishnan, operating cash flows continued to be a strong factor, with cash and cash equivalent crossing $4 billion.
Infosys added 39 new clients during the quarter, including 14 clients in the financial services space. The company noted that it is seeing good momentum in the market for cloud business and have executed more than 170 engagements. During the July-September period it won 20 engagements across cloud services, big data and security. The BFSI vertical grew 0.6% sequentially, while manufacturing was up 2.8% a quarter-on-quarter basis. Geographically, North America grew 2.2% sequentially, Europe grew 4.7%, while India declined by 15.4%.