Revenues in 2013 estimated to grow at 16%

The stock price of top Indian software companies were down with the US-based Cognizant Technology Solutions indicating a slower growth rate in 2013.

The Nasdaq-listed Cognizant, which is India’s second largest software exporter, filed Form 8K with the US Securities and Exchange Commission on compensation performance milestones to its top executives for 2013. In this, it indicated a lower growth rate in 2013 as against 2012.

This could be an indication that things may not be rosy for the Indian IT industry in 2013, said an analyst. Cognizant competes with Indian software service providers for business.

While the filing was not a guidance, the metrics indicate how Cognizant could perform next year. Its revenue may grow at 16 per cent in 2013, which is less than the anticipated 20 per cent in 2012.

Performance target

In November or December, Cognizant usually releases the board performance targets for its top management for setting the compensation. This is usually taken as a base level for the next year’s guidance.

Cognizant’s top executives will receive 100 per cent of their performance-based stock units only if it achieves 16 per cent revenue growth in 2013 to $8.515 billion.

Cognizant’s goal was to maintain industry-leading revenue growth. The targets for executives set by the board align well with this goal. Revenue target at 100 per cent payout would represent industry-leading growth, it said.

J.P. Morgan said, “We believe that this time around, there is likely to be an extra element of conservatism in 2013’s threshold of 16 per cent.”

Robert W. Baird & Co believes that Cognizant took a conservative approach in setting 2013 targets.

Following Cognizant’s filing, the top three Indian software companies witnessed a drop in their prices with Infosys bearing the maximum brunt.

The share price of Tata Consultancy Services on the Bombay Stock Exchange declined by Rs 1.30 to end at Rs 1,297.15; Infosys closed at Rs 2,382.30, down Rs 47 and Wipro’s price dropped by Rs 7.10 to Rs 381.

raja.simhan@thehindu.co.in

(This article was published on December 5, 2012)
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