Near-term clouds loom over Infosys

Last Updated: Fri, Dec 07, 2012 21:01 hrs

pAfter Nasdaq-listed Cognizant spooked the market by hinting at a slower growth in 2013 it is the turn of Infosys to sound an alarm bell The IT bellwether said its modest five per cent dollar revenue growth for FY13 may be under threatppDuring its discussion with analysts the Infosys management said the company&rsquos growth might be hit due to delays and postponements in a few large deals delayed decision-making by clients due to early start of the holiday season and natural events such as Hurricane Sandy Analaysts have cut the growth forecast for Infosys &ldquoWe cut our growth forecasts for the next two quarters and organic revenue growth for FY13 to 38 per cent year on year&rdquo said Bhuvnesh Singh and Vaibhav Dhasmana of Barclays Equity Research in their report titled &lsquoInfosys Ltd Near-term challenges persist&rsquoppBarclays said Infosys&rsquos new chief financial officer Rajiv Bansal was holding one-on-one conference calls with analysts &ldquoWe believe that while the company is proactively taking steps to revive its growth trajectory this would take time to yield tangible results The near-term challenges put the five per cent year-on-year growth guidance for FY13 at risk&rdquo said Singh and Dhasmana in their reportppThe Infosys management stated it continued to see challenges in the banking financial services and insurance BFSI vertical with an increased uncertainty The company added it had received indication from clients in the hi-tech segment of a &ldquolonger than normal furloughs&rdquo in December Hi-tech&rsquos contribution is about 45 per cent to Infosys&rsquos revenueppA note by Kotak Institutional Equities Research said &ldquoInfosys may fall one-two per cent short on its &lsquoat least five per cent&rsquo organic revenue guidance for FY2013E We hope that the company uses the coming quarter to either give confidence on the guidance process and execution to the street or stop giving guidance in case it has low confidence on demand environmentexecution&rdquopp Infosys has stopped providing quarterly guidance It has missed street expectations in six of the last seven quartersppAccording to analysts with the five per cent organic revenue under threat the company might also not be able to meet its margin outlookpp&ldquoWe note that while Infosys&rsquos revised guidance of &lsquoat least five per cent&rsquo organic growth implied a 37 per cent CQGR compounded quarterly growth rate through H2FY13 the street including us have been factoring in less that six per cent dollar revenue growth despite incorporating the benefits from the Lodestone acquisition&rdquo said a note by Emkay Global Financial ServicesppMeanwhile Infosys is changing its strategy to accelerate growth For this the company is decentralising decision making towards business and vertical heads and away from the CEOCFO office stated the Barclays noteppThe company is also setting up systems and mechanisms to better match demand against hiring considering the 18-month lag between hiring and actual flow of businessp

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