Infosys, the country’s second-largest software exporter, warned that it faces a volatile global economy and a possible slowdown in client spending.
The company narrowly missed expectations with a 15.4 per cent rise in first-quarter profit.
The bourses were unimpressed with the software company’s muted guidance, especially a flat dollar forecast; a conservative earnings-per-share estimate and its share price slipped 6 per cent soon after the numbers were announced.
Infosys posted a net profit of Rs 1,722 crore for the three months ended June 30, 2011, a 15.7 per cent increase year-on-year.
However, sequentially the net profit declined 5.3 per cent as higher wage costs impacted the bottom line.
Revenues for the quarter stood at Rs 7,485 crore, a year-on-year growth of 20.8 per cent and a quarter-on-quarter growth of 3.2 per cent.
The company’s muted outlook follows expectations that clients in the US and Europe may spend less.
Chief operating officer S.D. Shibulal, who will take over as CEO in August, said the environment warranted some caution. Customers in Europe are delaying decision making, he said.
The market’s reaction could have been exacerbated as it was looking forward to a “solid quarter” after the company’s lackluster performance in the March quarter.
The company has not revised its guidance in dollar terms for the whole year, which has also disappointed the markets.
In 2011-12, Infosys expects revenues to be in the range of $7.13-7.25 billion, a growth of 18-20 per cent.
Analysts had expected a full-year revenue growth of 20 per cent.
For the quarter ending September 30, the company has said revenues (under IFRS consolidated) are expected to be between Rs 7,699 crore and Rs 7,810 crore, a growth of 10.8-12.4 per cent.
EPS was seen in the range of Rs 29.64 and Rs 30.15.
As on June 30, 2011, cash and cash equivalents, including investments in available-for-sale financial assets and certificates of deposits, was Rs 16,969 crore against Rs 16,005 in June 2010.
The company added 26 new customers and hired 2,740 people on a net basis.
It expects to hire 12,000 employees on a gross basis in the three months till September 30, 2011.
Infosys’s client acquisition numbers are the lowest in four years in the reporting quarter and its costs are increasing because it is paying higher wages to retain talent.
A CLSA report said, “Street hopes now rest on a big out-performance in September quarter and we would advise caution here.”
The management expects margins in the second quarter to remain flat.
The Infosys share ended 4.27 per cent lower at Rs 2,794.25 on the BSE yesterday from its previous closing day.
