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Infosys Ltd stocks tumbled over eight per cent on Thursday after the bellwether company said it was reducing its revenue guidance by half for the year,
Announcing its first quarter results, the company said it continues to see slowdown for the second straight quarter as certain clients are backing off from outsourcing engagements and is seeing negative growth in the US and Europe.
The bellwether cut its revenue guidance 5 per cent to $7.34 billion down from its April estimate of 8-10 per cent growth.
The company has posted a decrease of 1.2 per cent in the first quarter net profit to Rs 2,316 crore on a sequential basis. However, its revenues were up 8.6 per cent to Rs 9,616 crore. Reasons for this loss were attributed to delayed decision making and a ‘one off’ revenue loss on a cancellation of a European project worth $15 million. Also, the company lost $30 million in hedging as a result of a weak rupee in geographies that it operates.
The company saw a 32 per cent growth in net profits on a year-on-year basis. The company said that henceforth will not give out guidance at the end of every quarter. “Our guidance is a statement of facts and there is a lot of uncertainty in global markets and hence we will not issue guidance from next quarter,” said Mr S.D. Shibulal, CEO, Infosys. This sent the scrip tumbling by Rs 211 or 8.4 per cent and closed at Rs 2,260.
Reacting to the numbers, analysts gave a thumbs down. “Overall the results were gloomy with guidance numbers indicating that management is seeing challenges in terms of IT spends from big accounts.”
Further, the company expects some pricing declines due to change in their solutions portfolio and increased pricing negotiations. “Overall, we consider pricing stable,” Mr Shibulal added.
The slowdown contagion is affecting its main business geographies in the US, Europe and has spread to most of its verticals.
US saw negative growth of 8.4 per cent and Europe saw de-growth of 7.2 per cent over the previous quarter. These two verticals contribute about 80 per cent of the company’s revenues.
“Apart from testing services and IT infrastructure management, all the other service lines have seen negative growth,” said Mr Shashi Bhusan, Senior Research Analyst, Prabhudas Lilladher.
> venkatesh.ganesh@thehindu.co.in
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