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Bellwether beats down forecasts

Mumbai, April 10: Infosys Technologies Ltd on Thursday sent shockwaves in the stock market by projecting a 11 to 12 per cent rise in earnings for the current fiscal. The company’s net profit grew by a modest 23.14 per cent to Rs 259 crore for the fourth quarter ended March 31, 2003 as against Rs 210.33 crore in the corresponding previous quarter.

The guidance was woefully diminutive vis-à-vis market expectations that had factored in a 20 per cent rise in earnings growth. This culminated in an across-the-board offloading of technology stocks with Infosys leading the pack.

Infosys projected an earnings per share (EPS) of Rs 161-163 for this financial year as against Rs 144.68 in 2002-03. The consolidated EPS figure, which includes subsidiary Progeon, is Rs 162-164. It has projected a consolidated income ranging between Rs 4,484 crore and Rs 4,565 crore for 2003-04, and the same for the company has been put between Rs 4,408-4,479 crore.

Nandan M. Nilekani, CEO, president and managing director, explained that while arriving at the outlook, the company considered the overall macro economic scenario, including the war in Iraq, the outbreak of severe acute respiratory syndrome virus, business expected from existing and prospective clients, besides competition.

“The company’s guidance did it in. While it can be construed as conservative, nevertheless, it showed as to how earnings visibility is poor given the economic situation and tough competition,” summed up an analyst from a leading private sector bank.

In the BSE, the stock slumped to finish at Rs 3,044.60, a whopping loss of Rs 1,113.45 or 27 per cent over its previous close. It had opened on a jittery note at Rs 4,090 on Dalal Street today before slipping into the day’s low of Rs 3,010 following the news of earnings projection.

Though Infosys managed to achieve its profit guidance for 2002-03, it fell short of market expectations which had pegged it in the region of Rs 260-275 crore. It reported sales of Rs 3,622.69 crore for the year 2002-03, up 39.14 per cent over Rs 2,603.59 crore recorded in the previous year. Net profit stood at Rs 957.93 crore, up 18.56 per cent over Rs 807.96 crore in 2001-02. “The uncertainties relating to the US economy continues to have an impact on the industry growth with longer sales cycles,” Nilekani said.

The company reported sales of Rs 1,019.85 crore for the fourth quarter ended March 2003, up 49.95 per cent over Rs 680.14 crore reported in the previous corresponding quarter.

At its meeting today, the board of directors recommended a final dividend of Rs 14.50 per share for the year, amounting to a net outflow of Rs 96.05 crore.

Meanwhile, Infosys plans to hire nearly 1,000 people during this quarter, said S. Gopalakrishnan, chief operating officer.

The company is also hopeful of entering China soon with a branch office in Shanghai, board member Srinath Batni said. Earlier it had faced legal barriers in entering that country.

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