Shares of India's second largest software services provider
Infosys tumbled 10% on Thursday morning
after the company disappointed the street with lower-than-expected first
quarter net profit and a significant cut in US dollar revenue guidance.
Its consolidated net profit for the first quarter rose 33%
year-on-year (down 1% sequentially) to Rs 2,289 crore, while revenue was barely
in-line at Rs 9,616 crore, up 29% (up 9% quarter-on-quarter).
Analysts on average were expecting Infosys to report a net
profit of Rs 2,448 crore on revenue of Rs 9,665 crore.
Tech companies have been hit hard as clients delay decision
making and cut budget spends amid the global economic uncertainties led by the
Eurozone debt crisis. The volatile currency movements have also hurt IT firms.
On top of that Infosys has also been bogged down by internal restructuring
issues over the last few quarters.
Infosys once trendsetter has fallen behind rival Tata
Consultancy Services, missing already conservative guidance for several
quarters and that trend has continued in April-June.
The company was expected to cut its US dollar revenue
guidance following the sharp depreciation in rupee to the dollar. But it
shocked the street with a forecast of just 5% growth in USD revenue for the
full year, sharply lower than its earlier guidance of 8-10% growth. It now expects its USD revenue will be at
least USD 7.34 billion this year.
Its USD earnings per share is expected to be at least USD
3.03, up 1% YoY.
In another surprise move, it has not provided guidance for
the second quarter, citing an unclear client spend environment.
In the first quarter, its USD revenue rose 5% to USD 1.75
billion, which was also lower than its own and street forecast of USD 1.77
billion.
For the last quarter, its EBIT margin was down to 28% from
29.9% in Jan-March, with clearly some pressure on pricing.
"Global currency volatility continues to a big
challenge for the industry," said V Balakrishnan, CFO.
SD Shibulal, Infosys CEO and MD also said there were
challenges in the global economic situation resulting in slower IT spends by
large corporations.
While Moshe Katri, MD of Cowen & CO agrees the
environment has deteriorated considerably, he told CNBC-Tv18 that Infosys is
going through transformational and structural issues; the biggest
disappointment was the guidance.
Meanwhile, Infosys added 51 clients in the first quarter.
Among key markets, while North America operations saw 1.6% sequential growth,
Europe declined 8.1% and India operations were down 4.3%
The company took a one-time write off of USD 15 million in a
project in Europe and lost USD 13 million on currency fluctuations.
India's largest software services provider TCS will also
report its first quarter earnings post market hours. Analysts on average expect
the profit after tax to grow 11% quarter-on-quarter to Rs 3,250 crore while
revenue is seen up by 12% to Rs 14,806 crore.
At 9:30 hrs, Infosys shares were down 9.4% at Rs 2,239.80 on
NSE. TCS was down 1.1% at Rs 1,244.50.
Source: www.moneycontrol.com
Thanks,
Gaurav Agarwal
Head Dealer
DENIP Consultants Pvt Ltd
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