India's second largest IT services exporter Infosys Technologies reported 2.48% growth in Q3FY11 net profit of Rs 1,780 crore and revenues grew by just 2.3% at Rs 7,106 crore as against expectations of Rs 1,814.69 crore & Rs 7,200.07 crore, respectively. Explaining the rationale behind the disappointing numbers, the management said that seasonality led to lower volume growth in the third quarter. The BSE IT Index crashed 3.41%; Infosys tanked 5.1% and Wipro was down 3%. HCL Tech fell 2.5% and TCS lost 1%.
The weaker economic outlook in developed markets coupled with high unemployment and risk of sovereign default could impact industry growth, says S Gopalakrishnan, CEO & MD of Infosys.
The company has raised its dollar revenue and earning guidance for the year ending March 2011 (FY 2011) upwards. The company expects 14% to 14.5% growth in earnings per American depository share (ADS) at $2.60 to $2.61 in FY 2011 over FY 2010 (year ended March 2010). The company has forecast 25.7% to 26.1% growth in revenue at $6.04 billion to $6.06 billion in FY 2011 over FY 2010.
Uncertainties related to sustainability of the global economic recovery could create greater currency volatility in the near future, said Chief Financial Officer V. Balakrishnan. He said the company's focus will continue to be on high-quality growth -- balancing both revenue growth and margins.
In rupee terms, Infosys has forecast a between 0.28% decline to a 0.41% increase in EPS at between Rs 31.06 to Rs 31.28 in Q4 March 2011 over Q3 December 2010. The company expects a between 0.71% to 1.74% growth in revenue at between Rs 7157 crore to Rs 7230 crore in Q4 March 2011 over Q3 December 2010.
Though the third quarter results came in as disappointing, Srishti Anand, IT Analyst, Angel Stock Broking sees strong numbers going ahead from Infosys. Infosys’ FY11 earnings per share would be close to Rs 121 and FY12 EPS would be upwards of Rs 145 per share, she said. "Management has spoken about a very aggressive hiring strategy of close to 26,000 campus offers with a huge conversion rate of 70%. As well as 25,000 lateral. So, I am talking about more than 40,000 net additions, on probably the base of 1.6 or something, which translates into strong growth for FY12 close to 25% plus. So, I am really comfortable and the guidance looks pretty promising that way."
Dipen Shah, Senior Vice President (PCG Research), Kotak Securities said, “The Q3 results of Infosys were marginally lower than our expectations. The Management commentary reflects caution on the back of macroeconomic concerns. Thus, the 4Q and FY11 guidance are below market expectation. The underlying fundamentals remain strong, in our opinion”.
Rajiv Mehta, AVP - Research, IIFL India Private Clients, IIFL, said “Infosys Q3 results came in behind expectations with muted volume growth of 3% qoq being the key disappointment. The constant dollar revenue growth at 4.7% qoq was aided by sequential improvement in offshore pricing. Margins were maintained (in line with expectations) despite significant rupee appreciation and utilization decline supported by improved pricing and favourable cross currency movements. Employee addition remained strong and attrition seems to have stabilized which is good. Conservative management commentary and flattish Q4 FY11 growth guidance was also not encouraging. Stock would react negatively to the event in near term. Over the longer term, however, Infosys should do well and possibly beat the market in 2011. Our rating remains overweight on the company”.
Rajiv Mehta, AVP - Research, IIFL India Private Clients, IIFL, said “Infosys Q3 results came in behind expectations with muted volume growth of 3% qoq being the key disappointment. The constant dollar revenue growth at 4.7% qoq was aided by sequential improvement in offshore pricing. Margins were maintained (in line with expectations) despite significant rupee appreciation and utilization decline supported by improved pricing and favourable cross currency movements. Employee addition remained strong and attrition seems to have stabilized which is good. Conservative management commentary and flattish Q4 FY11 growth guidance was also not encouraging. Stock would react negatively to the event in near term. Over the longer term, however, Infosys should do well and possibly beat the market in 2011. Our rating remains overweight on the company”.
NOTE: Some portion has taken from Moneycontrol.
Infosys has forecast flat-to-slightly higher sequential growth in earnings in Q4 March 2011 in dollar terms. The company has given guidance of a 1% to 2.01% growth in revenue to $1.601 billion to $1.617 billion in Q4 March 2011 over Q3 December 2010.
MY PERSONAL VIEW IS TO ACCUMULATE BETWEEN 3000-3100 WITH A VIEW OF ONE YEAR AT LEAST.
MY PERSONAL VIEW IS TO ACCUMULATE BETWEEN 3000-3100 WITH A VIEW OF ONE YEAR AT LEAST.
