Country’s second largest software services exporter Infosys on Friday announced a 3.3 per cent rise in its fourth-quarter net profit at Rs2,394 crore but muted revenue forecast on challenging global economy sent its shares tumbling 22 per cent.
Infosys shares crash, in turn, dragged Sensex down by nearly 300 points with the BSE 30-share index closing at 18,242.56 points while Nifty slumped 65.45 points to close at 5,528.55 level.
The company reported a consolidated net profit of Rs2,394 crore for the January-March quarter of 2012-13 fiscal and posted 18.09 per cent rise in revenues at Rs10,454 crore.
The IT major pegged a revenue guidance of 6-10 per cent, which is lower than that of IT body Nasscom, which expects industry to grow by 12-14 per cent in the current fiscal.
The company departed from its earlier practice of giving out annual Earnings Per Share (EPS) guidance.
On the muted sales guidance for FY’14, Infosys CEO and Managing Director S D Shibulal told reporters in Bangalore: “That is a reflection of the volatility, which we have seen over the last two quarters. The environment remains volatile as well as mixed. There are challenges in the US and Europe.”
The over $100-billion Indian IT-BPO sector gets about 80 per cent of its revenues from the US and and Europe.
Reacting to the revenue guidance, Infosys’s shares tumbled by 21.33 per cent to Rs2,295.45 apiece on the BSE, dragging down 30-share Sensex by nearly 300 points.
“Our clients are struggling taking decisions beyond the environment. Our ramp-up on some of the deals which we have won is slower than what we had expected in Q4 2012-13,” he added.
He further added that the company has pegged a growth of 0.5 per cent growth at the lower end and 2 per cent growth quarter-on-quarter on the upper end.
“As usual our guidance is a statement of fact. We have looked at our pipeline, our visibility in the next year and taken a decision of a wide range in the guidance between 6 to 10 per cent,” he said.
Shibulal said pricing decline and cross-currency impact hit fourth quarter results.
“Q4 turned out to be a softer quarter than what we expected. Our volume went up by 1.8 per cent in Q4 at the same time we had an impact of 0.7 per cent due to pricing decline as well as an impact of 0.4 per cent because of the cross currency movement. Both impacted Q4,” he added.
Infosys Chief Financial Officer Rajiv Bansal said the global environment is volatile, which is affecting margins.
“I think the world is very volatile right now, the environment is very volatile and also considering that we have had growth challenges in the previous couple of quarters, I think we have set out for ourselves in terms of giving guidance which we believe is cheerful,” he added.
He further said “If you look at the margins, we have done decently well this quarter. Our guidance for operating margins was 26 per cent for the full year and we are ending it at 25.8 per cent inspite of this being a soft quarter for us.”
The IT giant’s consolidated FY’13 net profit rose by 13.3 to Rs 9,421 crore on the back of 19.6 per cent rise in revenues at Rs40,352 crore.The company has decided to set aside up to $100 million to invest in products, platforms and solutions ideas in line with Infosys 3.0 strategy.
“Infosys shows continued signs of stress in their overall performance and traction in their new business direction. Continued weak guidance, even in the context of firming economic indicators globally and especially in the key US market, is a significant cause of concern,” said Partha Iyengar, Country Manager - Research, Gartner India while commenting on company’s result.
On discontinuing the practice of giving annual EPS guidance, Infosys CFO Rajiv Bansal said: “Considering that we need to make a lot of investments as we go along and also the kind of volatility that we are seeing in the market place, we have discontinued the practise of giving EPS guidance.”
In terms of US dollars, the company reported a net profit of $444 million in the fourth quarter and revenues of $1.938 billion. For the entire 2012-13 fiscal, its net profit stood at $1.725 billion and revenues were at $7.398 billion.
In October last year, Infosys while giving its revenue guidance for the 2012-13 fiscal had pegged its revenues at $7.343 billion.
Considered its IT industry bellwether status, Infosys has been struggling to meet its forecast in the last few quarters, experts said.
Following Infosys’ lower-than-expected performance and guidance, the results of the other top IT firms will be closely watched. TCS, India’s largest software services exporter, will announce fourth quarter results on April 17, followed by HCl Technologies (April 17) and Wipro (April 19).