Infosys regains some lost ground after falling 6% on lower margin guidance

Last Updated: Mon, Apr 16, 2018 10:41 hrs
An employee walks past a signage board in the Infosys campus at the Electronics City IT district in Bengaluru

Mumbai: Infoys shares plunged sharply Monday morning, with disappointing earnings guidance from the company triggering some heavy selling at the counter in opening trades. Despite regaining some lost ground subsequently, the stock is still trailing its previous closing price by about 3%.

After declining to a low of Rs 1099, losing about 6% in the process, the stock has recovered to Rs 1133 now.

On the National Stock Exchange, the Infosys counter has clocked a volume of nearly 7 million shares so far in the session. On BSE, the counter has clocked a volume of about 3.08 lakh shares, more than 1.7 times the average daily volume of 1.76 lakh shares.

The fourth quarter results are in line with expectations, but the lower margin guidance of 22 - 24% for current year has spooked the market. The management has given a revenue growth guidance of 6 - 8% in constant currency terms. The company has cited investment requirements for the digital business, localisation within markets including scaling up of local talent and data centres, employees reskilling and revaitalization of the sales team as the reason for lowering the margin guidance.

Infosys posted a net profit of Rs 3690 crore for January-March quarter. In the corresponding quarter of the previous year, the company had posted a net profit of Rs 3603 crore. However, compared to the quarter ended December 2017, Infosys' net profit in the latest quarter was down 28.2%

The substantial drop in fourth-quarter profit compared to the preceding quarter was because the preceding quarter's results included a one-time gain of $225 million on account of the conclusion of an advance pricing agreement with the US Internal Revenue Service.

The IT major has recommended a final dividend of Rs 20.50 per equity share for the financial year ended
March 31, 2018 and special dividend of Rs 10 per equity share.

In his post results press statement, Infosys CEO Salil Parekh announced plans to put up subsidiaries Skava and Panaya on sale. The acquisitions were done under the leadership of his predecessor Vishal Sikka.

It is widely expected that the IT stock will see an upside of 7 to 12% this year, considering the rapid acceleration in digitalisation and increasing deal wins. New deals won by the company increased 12.3% (year-on-year) in the fourth quarter, the best in last six quarters.

The stock, which touched a low of Rs 860 on 22 August 2017, extending losses after Sikka's resignation, went on to touch a high of Rs 1221.05 in January this year.

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