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Infosys Q4 net up 3.3%; projects modest growth

Infosys Q4 net up 3.3%; projects modest growth
Highlights

Muted guidance sends shares tumbling Bangalore (PTI): India's second- largest software services exporter, Infosys Ltd, on Friday...

Muted guidance sends shares tumbling

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Bangalore (PTI): India's second- largest software services exporter, Infosys Ltd, on Friday reported a 3.3 per cent rise in fourth-quarter net profit. However, the company has announced lower revenue guidance citing 'challenging global economy', which sends its shares tumbling over 21 per cent.

The company registered a consolidated net profit of Rs 2,394 crore for the last quarter of 2012-13 fiscal and posted 18.09 per cent increase in its revenues at Rs 10,454 crore.A On the other hand, the company has issued revenue guidance between 6 to 10 per cent, which is lower than that of Nasscom, which predicts a growth of 12 to 14 per cent in the current fiscal. It also withdrawn providing annual earnings per share (EPS) guidance.

Speaking on the guidance for fiscal 2014, Infosys CEO and MD, SD Shibulal said, "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."

"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.

"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. "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 in spite 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 Rs 40,352 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.A On dollar account, 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.

On client additions, Shibulal said "Our clients additions in Q4 have been very good. We added 56 more clients in Q4. Our total number of million dollar have gone up to 448."

However, the Infosys CEO and MD admitted that pricing is under pressure. "Our pipeline is robust. When I look at the future, I see that environment will be volatile and challenging. The pricing continues to be under pressure because of the focus on costs by our clients." Shibulal added that the company's hedging strategy helps it to minimise impact of volatile markets and currency.

"The global currency market continues to be volatile reflecting the uncertain economic environment. Our hedging strategy helps us to minimise the volatility impact. We have a healthy balance sheet with our cash and cash equivalents at $4.4 billion," he added.

Why Infy down

  • Disappointing guidance for 2013-14, the company expects a revenue growth between 5 to 10 per cent against 12 per cent anticipated by investors
  • It missed current year's guidance as revenue grew by 5.8 per cent against a forecast of 6.5 per cent
  • Could not provide earnings guidance for 2013-14
  • Last quarter sales on sequential basis reported flat
  • Company margins fell more than expected
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