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Friday , July 13 , 2012
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Tears & cheers for tech twins
Infosys figures disappoint

Mumbai, July 12: Infosys — the Bangalore-based IT services giant — posted poor results on Thursday with net profits in dollar terms in the first quarter ended June 30 plunging 10.2 per cent to $416 million from $463 million in the March quarter.

Revenues also dipped by just over 1 per cent to $1,752 million from $1,771 million in the March quarter.

The impact of the double whammy was exacerbated when the tech giant slashed its revenue forecast for the entire year, reflecting the challenging environment of pricing cuts and weak demand. Infosys said full-year revenues were expected to be $7.343 billion, a rise of 5 per cent over last year. It was roughly 4.5 per cent lower than the earlier estimate of $7.55 billion to $7.69 billion.

The full year revenue forecast marks a sharp comedown from its earlier estimate of 8 to 10 per cent growth for the year.

For the first time since it started giving guidance, Infosys did not give a guidance for the second quarter, which ends on September 30.

In rupee terms, Infosys posted a net profit of Rs 2,289 crore for the first quarter, a 32.9 per cent growth over Rs 1,722 crore in the corresponding quarter of last year. Brokerages had expected the company to clock profits of around Rs 2,400 crore.

With the rupee depreciating nearly 9 per cent in the quarter, Infosys was expected to fare well on the margin front. A one per cent cut in the rupee’s value against the US greenback normally is seen to impact margins of IT companies positively by around 40 basis points.

The analysts had expected Infosys’ margins to rise at least 400 basis points.

However, the operating margins at Infosys stood at 28 per cent for the three months ended June 30, a contraction of 190 basis points over the 29.90 per cent recorded in the preceding quarter.

Infosys also failed to meet its own dollar revenue guidance for the period. The company had in April forecast that revenues for the quarter would come between $1,771 million and $1,789 million. Actual revenues came in at $1,752 million.

The only relief according to observers was the nearly 29 per cent growth in rupee revenues to Rs 9,616 crore over the year-ago quarter.

The senior management of Infosys said that though the company had witnessed a rise in volumes during the first quarter, it saw pricing cuts of around 3.5 per cent during the quarter and that this could last through this year.

Analysts said the lowering of dollar revenue forecast indicated a challenging road ahead for the company.

“Overall, the results were gloomy with guidance numbers indicating that the management is seeing challenges in terms of IT spends from big accounts,” said Ankita Somani, research analyst at Angel Broking.

Infosys, which has been struggling to meet its own forecast in the last few quarters, also did not give out any guidance for the current quarter. S.D. Shibulal, managing director and chief executive officer, indicated that this was because of poor visibility as the current environment is volatile.

The disappointment from Infosys was reflected in its stock price that slumped over 10 per cent in intra-day trades to Rs 2,216.05.

The scrip rallied from the lows but still closed down 8.15 per cent, or Rs 201.10, at Rs 2,265.25 on the Bombay Stock Exchange.