Infosys projects modest growth, scrip tanks

Bangalore : Infosys Ltd Friday projected a modest revenue growth of six to 10 percent in dollar terms for fiscal 2013-14 over last year, reflecting global economic uncertainties.

“Global economic uncertainties remain challenging for the IT industry,” Infosys chief executive S.D. Shibulal said in a statement here after the Indian IT bellwether announced its financial results for the fourth quarter (January-March) of fiscal 2012-13.

The global software major’s consolidated revenue increased 19.6 percent year-on-year (YoY) to Rs.40,352 crore (Rs.404 billion) from Rs.33,734 crore in the same period of the previous fiscal (FY 2012).

Under the International Financial Reporting Standard (IFRS), revenue grew 5.8 percent YoY to $7.4 billion from $7 billion.

Echoing Shibulal, Infosys chief financial officer Rajiv Bansal said the global currency market continued to be volatile, reflecting the uncertain economic environment.

Infosys results for last fiscal (FY 2013) and its revenue forecast for this fiscal (FY 2014), however, did not go well with investors, as its blue chip scrip tanked on the bourses in early trading, losing a whopping 18.3 percent or Rs.534 in value to Rs.2,383 before noon from Thursday’s closing price of Rs.2,917 or Rs.243 from its opening rate of Rs.2,626 per share of Rs.5 value.

Noting that the environment continued to be challenging, Shibulal said clients were completely focused on cost, leading to pricing pressure.

“If you look at the US and Europe, the signals are mixed, which is hampering clients’ ability to take quick decisions. But we are confident of meeting the revenue guidance given the pipeline and wins we had so far,” Shibulal added.

Unlike over the years, Infosys has not only discontinued giving quarterly guidance since July 2012, but also stopped projecting revenue in figures for the new fiscal (FY 2014).

“In view of the volatility we have seen during the last six quarters, we have given the guidance in a range of six to 10 percent in dollar terms,” Bansal said.

Asserting that in the prevailing environment, the quarterly numbers would fluctuate, Bansal said as the pipeline was healthy, the company was well positioned in the new fiscal to achieve the projected growth.

“The world is very volatile, if you look at the quarterly movement, which would continue to fluctuate because a lot depends on clients ramping up on deals we have already closed and on the new deals getting closed on time,” Bansal observed.

Admitting that growth was the biggest challenge, the financial executive said the company had to get back to growth to make investment and differentiate in its service offerings.

“We have to get the growth back, which will require us to make investment in the marketplace and differentiate in our service offerings. Our guidance is in light of the volatility we have faced over the last eight quarters,” Bansal added.

As against the company’s annual revenue guidance of five percent organic growth last fiscal (FY 2013) in dollar terms, consolidated revenue grew 4.5 percent year-on-year (YoY), which is 0.5 percent less.

“Though our revenue guidance was five percent for the year organic, we have done 4.5 percent. What exactly happened was that our volume onsite went up by 4.75 percent and offshore by 0.5 percent, reflecting in a combined volume growth of 1.8 percent,” Shibulal told reporters at a media briefing on the fiscal results.

“At the same time, we lost revenue productivity by 7.7 percent and by 0.4 percent because of cross-currency movements in fourth quarter (January-March) of the fiscal under review,” Shibulal pointed out.

In third quarter (Oct-Dec), the company’s volume growth went up 1.5 percent and revenue productivity was 1.8 percent higher, resulting in a combined growth.

“This time (fourth quarter), while volume went up by 1.8 percent, because we lost 0.7 percent on pricing and 0.4 percent on cross-currency, our organic growth ended up at 4.5 percent,” Shibulal clarified.

“Our hedging strategy helped us to minimise the volatility impact. We have a healthy balance sheet with our cash and cash equivalents at $4.4 billion,” Bansal said in the statement.

The company also headwinds as far as cost is concerned.

“We had paid $140 million towards interim compensation during last fiscal. We also have $36 million charge because of the Lodestone acquisition,” Shibulal recalled.

The company acquired Lodestone Holding AG, a leading Switzerland-based management consulting business, in Sept 2012 for $349 million (Rs.1,932 crore/Rs.19 billion).