Infosys may have lost its bellwether status a while ago but India’s third-largest software outsourcer’s ability to charm both the Street and industry remains intact.
The IT major will be keenly watched as it announces its second quarter earnings on Friday, four months after its former Chairman N. R. Narayana Murthy was called out of retirement to steer the company forward.
“The industry is looking out for Infosys’ commentary… If the company is able to meet or exceed its forecast in the traditionally strongest July-September quarter, then it will be a smooth ride for the next two quarters,” said Ankita Somani, IT and Telecom Analyst at Angel Broking.
The Bangalore-based company had provided a revenue guidance of 6-10 per cent growth in dollar terms for the financial year 2014. “This is a wide band,” said Somani, who has a ‘neutral’ call on the Infosys stock.
Most brokerages had ‘buy’, ‘hold’ or ‘outperform’ calls, expecting a “decent” quarter from Infosys, with a consensus estimate of 8-12 per cent rise in Q2 net profit. On the revenue front, the IT major has been underperforming the industry the last two years.
“We do not expect any miracles from Infosys, but if it does well, others may do better,” said Sudin Apte, Chief Executive Officer of research firm Offshore Insights.
Sharekhan Securities expects Infosys to post a 3 per cent rise in revenue growth, 130 basis points margin expansion and a 13 per cent increase in net profit on a quarter-on-quarter basis.
“Murthy does not have a magic wand to change the fortunes of the company in one quarter. The performance has more to do with the demand environment, which has improved in the last two-three months,” said Sanjeev Hota, sector analyst at Sharekhan.
Infosys also saw a number of high profile exits after Murthy took over. In July, a month after Murthy’s re-entry, Basab Pradhan, the then Global Head of Sales, quit. Sudhir Chaturvedi, who headed the financial services business in the Americas, exited in August. Ashok Vemuri, who was heading Infosys’ Americas business, resigned.
Ahead of the earnings, the Infosys scrip closed up 0.53 per cent at Rs 3,124.15 on the BSE. Indeed, IT stocks were in the limelight with eight hitting fresh 52-week highs on the NSE on Thursday. The BSE IT and CNX-IT indices gained about 0.4 per cent each.