Infosys Ltd met its own revenue guidance for the April-June quarter but failed to cheer the market which expected an upward revision in dollar revenue outlook for the entire fiscal.
“It is disappointing that the company has not revised its estimates. With the company relying on the second half of the fiscal to lead growth, we will cut our earlier 23 per cent growth expectations, as the client spends in the second half are typically weaker,” said IT sector analyst at Angel Broking, Ms Srishti Anand.
The company stuck to its full year revenue growth forecast of 18-20 per cent (dollar terms) to $7.13-7.25 billion.
The market reacted negatively to the results pulling down the stock by over 4 per cent to close at Rs 2,794.25 on the Bombay Stock Exchange. Earnings per share for the quarter were Rs 30.14 registering a quarter-on-quarter decline of 5.3 per cent and year-on-year growth of 15.7 per cent.
Though clients have allocated larger budgets towards IT spends, there could be delays in the actualisation of projects due to the uncertain environment, said Mr Abhishek Shindadwar, IT sector analyst at ICICI Direct.
Admitting as much, CFO, Mr V. Balakrishnan said all developed nations are grappling with structural issues like inflation and unemployment. “The US corporates are sitting on $2 trillion but are worried about the environment and so they are not spending.”
But an analyst with Kotak Securities, Mr Dipen Shah, Senior Vice-President (Private Client Group Research), said Infosys results were marginally higher than their estimates.
“It has not seen any budget or pricing cuts from clients, as yet. The large deals and transformational deals continue to flow and this is encouraging.”
For the first quarter, however, wage inflation pulled down the net profit, on a sequential basis, by 5.3 per cent to Rs 1,722 crore while revenues grew 3.2 per cent to Rs 7,485 crore. For the quarter ending September 30, 2011, the company gave out a revenue guidance which is in the range of Rs 7,699 crore to Rs 7,810 crore, representing a year-on-year growth of between 10.8 per cent and 12.4 per cent.
On the margins front, the company reported an operating margin erosion of 291 bps down at 26 per cent over the previous quarter's 29 per cent due to the wage hikes, currency headwind of one per cent and lower levels of utilisation at 69.6 per cent. The margins will be at the same level in the second quarter a well.
Among the various industry verticals, retail grew the fastest at 15.8 per cent sequentially, while telecom continued to lag, with growth falling by 7.1 per cent. In the service lines, product engineering services grew the fastest at 39.1 per cent. As far as geographical growth goes North America grew by 5.1 per cent and Europe was up marginally by 0.5 per cent.
The CEO and Managing Director, Mr Kris Gopalakrishnan, pointed out that the company had added 26 new clients including three large transformational deals.
“Offshore revenue grew by 7.8 per cent year-on-year and volume grew by four per cent which means that the momentum is there,” he said. He added that inflation and sovereign debt were causes for concern but the company continues to take bold decisions and remain cautious.
The company saw a gross addition of 9,992 employees and net addition of 2,740 employees for the quarter. It plans to add 12,000 more employees in the second quarter.