BANGALORE/MUMBAI, Oct 12 (Reuters) - Indian software
services provider Infosys Ltd again disappointed
investors hoping for a more robust growth outlook, undermining
its standing as the country's information technology bellwether
and sending its shares down by almost 9 percent.
The company that once symbolised India's rise as an
outsourcing powerhouse has delivered a series of disappointing
growth targets since January as its internal reorganisation to
better compete with the likes of Accenture PLC takes
longer than hoped.
"It's a case of escape to a new orbit or stall and fall, and
at the moment they are stalling, but that doesn't mean the story
is over," said P. Phani Sekhar, a fund manager at Angel Broking
in Mumbai, which owns Infosys stock.
Infosys expects revenue of at least $7.34 billion, or growth
of 5 percent, for the year ending March, the company said on
Friday, unchanged from its previous outlook. That excludes any
additional revenue from its acquisition of Swiss consultancy
Analysts had predicted Infosys would raise its revenue
growth forecast to around 6 percent after it agreed last month
to buy Lodestone, the company's biggest overseas acquisition.
In July, Infosys cut that forecast to 5 percent from its
April estimate for 8-10 percent growth, catching investors by
surprise as global economic uncertainty hit tech spending.
Infosys reported weaker-than-expected operating margins for
the quarter ended Sept. 30, adding to pressure to revive its
business as the company loses market share to local rivals
including Tata Consultancy Services Ltd (TCS).
Shares in Infosys, which have underperformed its competitors
for over a year, slumped as much as 8.8 percent after the
earnings report. They pared their losses after the company
clarified its revenue guidance excludes sales from Lodestone.
"The margins were clearly a disappointment, but there are
some positives that one can say that perhaps things have
bottomed out for this company," said Bhavin Shah, chief
executive of Equirus Securities, who has a 'trade' rating on the
stock, which is equivalent to 'neutral.'
Profit at Infosys, whose clients include Bank of America
, Volkswagen and GlaxoSmithkline,
rose 24 percent to 23.7 billion rupees ($450 million) for the
quarter that ended in September from a year earlier.
That was in line with analyst expectations of 23.8 billion
rupees, according to Thomson Reuters data.
But operating margins in the quarter fell 160 basis points
from the preceding quarter to 26.3 percent after the company
raised wages for 20,000 employees in the April-to-June period.
Infosys added 39 clients in the latest quarter, its
slowest pace of addition in six quarters.
The company said on Friday that it expects operating margins
will decline by 200 basis points in the current fiscal year.
The company also cut its full-year outlook for earnings per
American Depository Share to at least $2.97 from $3.03
previously, due to foreign exchange volatility.
Earnings per India share are forecast to rise 10.3 percent,
down from its July view of 14.4 percent.
"The guidance remains weak from an earnings perspective.
It's been cut more than people thought it would be," said Ankur
Rudra, an analyst with Ambit Capital in Mumbai.
Investors had seen some signs of stability for the global
economy and hoped for an uptick in demand, although the
International Monetary Fund warned this week that the United
States and Europe - the main markets for India's $100 billion
software and services outsourcing industry - could slide back
unless they resolved their debt troubles.
"Overall, there is disappointment, but marginal. We expect
Infosys to improve QoQ (quarter on quarter) growth rates in line
with the macro improvement," said Dipen Shah, the Mumbai-based
head of private client group research at Kotak Securities.
Infosys mainly competes for orders in the more commoditised
sectors of maintaining computer systems, software applications
and helpdesk support. Rivals TCS and HCL Technologies Ltd
have aggressively chased such contracts.
TCS, the bigger rival of Infosys, is seen posting a 35
percent rise in quarterly profit to 33.1 billion rupees when it
reports earnings on Oct. 19.
To fight the competition, Infosys has been trying to focus
more on higher-value software and consulting.
Infosys agreed last month to buy Lodestone, a specialist in
advising companies such as BMW AG and Roche Holding AG
on how best to use SAP AG's business
Infosys has seen a series of top-level executive changes in
recent years. It will do so again, as CEO S.D. Shibulal reaches
the mandatory retirement age of 60 in less than three years.
Long-time Chief Financial Officer V. Balakrishnan has been
seen as a potential successor, and on Friday, the company said
Balakrishnan would give up his CFO position from Oct. 31 to head
the company's business process outsourcing unit, banking product
unit and India business unit.
"Heading these businesses constitutes running and managing a
P&L, perhaps positioning him as a possible contender for the CEO
role post-Mr. Shibulal," JP Morgan analysts said.
Balakrishnan will be replaced by Vice President of Finance