Shares in India's Infosys dive after weak earnings (Update)

Apr 12, 2013 by Gulab Chand

Shares in Indian outsourcing giant Infosys dived Friday after it issued a disappointing growth forecast and warned of global challenges, sparking worries about other firms in the flagship sector.

Infosys, whose earnings have traditionally been seen as a bellwether for the sector, said net profit rose 3.4 percent to 23.94 billion rupees ($439 million) for the three months to March, slightly ahead of forecasts.

But below-expectation January-March revenues and sales projections for the coming 12 months sent the firm's shares tumbling by more than 21 percent.

"The lower-than-expected results and guidance reflects the uncertain macro environment and the pricing pressures the company is experiencing," said Dipen Shah, head of private client research at Mumbai's Kotak Securities.

Many of India's IT outsourcing firms have been going through a rough stretch and they say the outlook for the industry remains difficult due to uncertainty in key US and European markets.

Infosys' fourth-quarter revenues rose 18 percent to 104.54 billion rupees, undershooting forecasts of 107 billion rupees.

And the outsourcer, the second-largest by revenues, said its dollar-based revenue in the financial year to March 2013 would grow by six-to-10 percent, far slower than analysts' hopes of up to 12 percent.

The company's results, which kicked off the quarterly earnings season, showed full-year revenue of $7.39 billion for the year-to-March 2013, missing its own earlier forecast of $7.45 billion.

It has stopped providing quarterly guidance since October and now has ceased giving an annual earnings per share forecast—both critical data for analysts. Barclays capital research head Bhuvnesh Singh said confidence in Infosys's guidance remains "low". In the past year, it has missed sales targets, lost market share and seen its stock slide as US revenues decline.

Gartner India's research manager Partha Iyengar said: "Infosys shows continued signs of stress in their overall performance.

"Continued weak guidance, even in the context of firming economic indicators globally and especially in the key US market, is a significant cause of concern."

Infosys closed the day down 21.33 percent at 2,295.45 rupees.

Shares in other outsourcers also fell, with market leader TCS ending down 1.63 percent at 1,511.3 rupees while another heavyweight, Wipro, down 4.72 percent lower at 383.30 rupees.

The results come as Infosys, which is also listed on New York's Nasdaq, seeks to reinvent itself with a strategic overhaul to focus on higher value software and consulting services instead of labour-intensive outsourcing services.

"Growth is the biggest challenge for us and we have to get growth back, which will require us to make investments and differentiate our service offerings," Infosys chief financial officer Rajiv Bansal told AFP.

Chief executive S.D Shibulal said global economic signals remain mixed, "which is hampering clients' ability to take quick decisions".

Infosys, which has undergone a top management shuffle, has decided to focus on higher value software and consulting services for clients instead of labour-intensive outsourcing services.

Its acquisition of Zurich-based firm Lodestone for $350 million in September was a step towards this move.

A quarter of the company's revenue comes from Europe, and in recent years the firm has shifted focus to emerging and new markets such as Singapore, Brazil, Mexico and eastern Europe.

India, with its large English-speaking workforce, accounts for at least 50 percent of the global outsourcing market and the industry is a vital exporter.

Analysts say fourth-quarter earnings of Indian companies could be worse than the previous quarter amid struggling economic growth.

Explore further: Short sellers not to blame for 2008 financial crisis, study finds

add to favorites email to friend print save as pdf

Related Stories

India's Infosys profit up 27% but shares tumble

Apr 13, 2012

Indian software exporter Infosys on Friday said its quarterly profit rose 27 percent, but disappointed the markets with a lower-than-expected growth forecast that saw its shares plunge.

India's Infosys Q2 profit up near 10%, shares jump

Oct 12, 2011

Indian software giant Infosys on Wednesday said quarterly profit rose by nearly 10 percent, powering its shares upwards as investors ignored a warning about an uncertain global market.

India's Infosys cuts revenue outlook, shares tumble

Jul 12, 2012

Shares in Indian software giant Infosys fell more than eight percent on Thursday after the company announced a surprise cut its full-year revenue outlook and reported a lower-than-expected profit.

Recommended for you

Chinese smartphone makers win as market swells

7 hours ago

Chinese smartphone makers racked up big gains as the global market for Internet-linked handsets grew to record levels in the second quarter, International Data Corp said Tuesday.

Full appeals court upholds labels on meat packages

7 hours ago

(AP)—A federal appeals court has upheld new government rules that require labels on packaged steaks, ribs and other cuts of meat to say where the animals were born, raised and slaughtered.

BlackBerry buys German anti-eavesdropping firm

7 hours ago

Canadian smartphone maker BlackBerry announced Tuesday the purchase of German voice and data encryption and anti-eavesdropping firm Secusmart, whose customers include NATO and German Chancellor Angela Merkel ...

India's Flipkart raises $1 bn to tackle Amazon

9 hours ago

India's top e-commerce company Flipkart said Tuesday it had raised $1 billion (60 billion rupees) in funds as it battles US giant Amazon for supremacy in the hyper-competitive local market.

User comments : 0