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IT major Infosys posted a 3.4 per cent growth in net profit at Rs 2,394 crore in the fourth quarter.
But its lower-than-expected revenue guidance for FY14 set alarm bells ringing, with the company’s shares tanking 21 per cent to Rs 2,295.45, its worst show in a decade. It pulled down the Sensex nearly 300 points to 18,242.56.
The company, on Friday, forecast a topline growth between 6 per cent and 10 per cent for FY14 against Nasscom’s estimates of 12-14 per cent for the industry. Infosys did not give out guidance for EPS (earnings per share) and earnings.
Volatile environment
Infosys’ CEO and Managing Director S.D. Shibulal told Business Line that poor guidance was more because of the nature of the company’s business model. “Our business is different compared to our competitors. Our exposure to discretionary spending (of Infosys clients) is double compared with that of the industry as a whole. Due to this, we end up operating in a volatile environment,” he said.
An analyst with SMC Global Securities, however, said that Infosys’ addiction to margins was the cause for the company’s poor performance.
“Infosys has lost its momentum. It will have to reduce its addiction towards margins, if it has to maintain growth,” Jagannadham Thunuguntla, Head of Research at SMC Global Securities Ltd, said. The IT bellwether recorded revenue growth of 18.1 per cent at Rs 10,454 crore.
On a sequential basis, net profit grew 1.1 per cent while revenues were flat. In dollar terms, net profit declined 4.1 per cent. Hence, a better show in rupee terms was largely because of currency movement, with the company CFO Rajiv Bansal admitting that hedging strategy helped in minimising the volatility impact.
The organic revenue growth was flat for the quarter but revenues from Lodestone, a consultancy company which Infosys bought last year, painted a better picture bringing in incremental growth.
Other income for the year grew nearly 24 per cent to Rs 2,359 crore, which constituted 18 per cent of profit before income tax.
Infosys did not give out hiring numbers for FY14 stating that it has spill-overs of about 10,000 from the previous year. It also announced that it has set aside $100 million to invest in products, platforms and solutions to incubate start-ups in these areas.
EPS for the quarter was at Rs 41.89. The board has declared a final dividend of Rs 27 per share for FY’13.
>venkatesh.ganesh@thehindu.co.in
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