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Infosys Q4 Profit Rises, But Slower Outlook Hits Shares

19 April, 2012

Infosys, India’s No.2 software services exporter, posted a 27.4 per cent rise in quarterly profit on Friday, but forecast lower-than-expected revenue growth for the current fiscal year due to an uncertain global economy and currency volatility.

Infosys shares plummeted more than 10 per cent after the results were announced, while the BSE Sensex was trading 0.4 per cent lower.

The company expects its dollar revenues to grow 8-10 per cent for the year ending March 2013 to $7.55 billion to $7.69 billion, lower than expectations of 10 per cent to 15 per cent forecast by most analysts.

“The numbers are disappointing and definitely lower than expectations. Clearly there is no immediate recovery in sight for the industry with expectations that the environment will continue to remain challenging,” said Dhiraj Sachdev, senior fund manager at HSBC Asset Management in Mumbai.

“However, there is one thing we need to keep in mind. This is the first quarter when the budgets are just prepared and in the planning stage so we will get more clarity on how the year will go when we are a few months into it.”

Infosys and its bigger rival, Tata Consultancy Services, part of India’s $100 billion information technology and back-office outsourcing sector, have benefited from cost-conscious customers bumping up demand.

An uncertain global economy and rising US rhetoric against overseas outsourcing of jobs to low-cost locations ahead of the November presidential election are, however, concerns for the sector that gets half its revenue from the world’s largest economy.

Tata Consultancy, Infosys, and No.3 exporter Wipro are also facing increased competition for a bigger share of the outsourcing business from global rivals like IBM and Accenture.

“The year ahead looks challenging for the IT (information technology) services industry, with slow recovery in the global markets,” said S.D. Shibulal, chief executive officer of Infosys.

Bangalore-based Infosys said consolidated net profit for the fiscal fourth quarter ended March 31 rose to Rs 23.16 billion from Rs 18.18 billion a year earlier.

Analysts had forecast a net profit of Rs 23.18 billion for the company, whose customers include Procter & Gamble Co and Volkswagen AG, according to Thomson Reuters data.

Global investor sentiment has turned fragile after recent data, including a weak March US jobs report and renewed concerns on European sovereign debt, highlighted risks to the nascent global economic recovery.

The Indian outsourcing industry gets about three-quarters of its revenue from the United States and Europe.

Worldwide IT spending is forecast to increase 2.5 per cent in 2012 from a year ago, research firm Gartner said on April 5, lower than its January forecast of 3.7 per cent growth. The forecast cut is due to a strong US dollar, it said.

“The global currency market volatility continues to be a challenge for the industry,” said V. Balakrishnan, chief financial officer of Infosys.


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Infosys Q4 Profit Rises, But Slower Outlook Hits Shares

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