Infosys shares slipped over 4 per cent intraday on Thursday after company’s COO Pravin Rao reportedly said that the company would face volatility over the next few quarters due to weaker spending from sectors such as energy and insurance.
At 3.06 pm, shares of Infosys were trading 4.14 per cent, or Rs 51.30, down at Rs 1,187. The scrip opened at Rs 1228.90 and slipped since then to touch a low of Rs 1181.10 in trade so far.
Later, the scrip closed 4.27 per cent down at Rs 1185.45.
However, Rao remained confident of Infosys achieving its 2016-17 revenue growth guidance of 11.5 per cent-13.5 per cent in constant currency, according to Nirmal Bang Institutional Equities.
Nikhil Kamath, co-founder and director, Zerodha said, “Infosys shares fell over 4 per cent on Thursday after the IT major warned about potential volatility in revenue growth in the coming quarters. Infosys also indicated that its June quarter margins may come under pressure on account of salary hikes.”
Rao further indicated that not much has changed from the beginning of 1QFY17, there were some potential headwinds in some sectors– (1) the healthcare and life sciences vertical (around 8 per cent of revenue) was indicated to face deferments due to pressure in business of clients from patent expiry, M&A action, etc (2) Retail vertical, which has been good thus far, has posted some bad quarterly results in both North America and Europe and needs watching. The 11.8-13.8 per cent dollar revenue growth guidance assumes 3.3-4 per cent compounded quarterly growth rate (CQGR) over FY17 which Nirmal Bang believes is a non-trivial number and probably does not factor in step down in US economic growth which the brokerage house are anticipating.
Nirmal Bang in a research note said, “Strong growth (4.5-5 per cent) in 1Q and 2Q is going to be critical to deliver this number as the second half will likely be seasonally weak. We are not sure whether the COO’s words have to be taken at face value as such cautionary statements have also been issued in the past with little impact on quarterly numbers. 2Q from the numbers mentioned above could pose a threat to the yearly guidance and could pose a threat to the yearly guidance and could lead to severe stock pressure as Infosys is one of the top holdings across both FII and DII portfolios. We are not too sure if the visibility on FY17 growth is 100 per cent at this point in time.”
Nirmal Bang continue to rate Infosys a ‘Sell’ with March 2017 target price of Rs 1,010.
For the quarter ended March 2016, Infosys reported a consolidated net profit of Rs 3,597 crore, up 3.81 per cent, against Rs 3465 crore in the sequential quarter ended December 2015.
(With agency inputs)