Infosys disappoints as revenue guidance misses expectations

Infosys Ltd, India's No2  IT software company, has reported a 3.4 per cent increase in fiscal fourth quarter net profit  to Rs2,394 crore and an 18.09 per cent growth in revenues to Rs10,454 crore on a year-on-year basis.

On sequential basis, net profit grew 1.1 per cent while revenues were up 0.3 per cent. Earnings per share (EPS) stood at Rs41.89 with a year on year growth of 3.3 per cent and quarter on quarter growth of 1 per cent.

The Bangalore-based IT services company has forecast a 6 to 10 per cent growth in full year (April-March 2013-14) revenue even as the company said it will gain from a strategic realignment of business.

Infosys forecast dollar revenue to grow between 6 per cent and 10 per cent for the fiscal year beginning April 2013 against analysts' estimates of 12 to 14 per cent.

Shares of Infosys tumbled 21.3 per cent to Rs2,295.45, recording its biggest single day fall since April 2003, after lower-than-expected revenue outlook for fiscal 2013-14 and disappointing Q4 earnings.

"Global economic uncertainties remain challenging for the IT industry,'' S D Shibulal, CEO and managing director of Infosys, said in a press statement.

The company's board has declared a final dividend of Rs27 per share for fiscal, 2013.

Infosys will set aside up to $100 million to invest in products, platforms and solutions in line with Infosys 3.0 strategy to emerge a high-quality company.

"We are making all the investments necessary to differentiate ourselves in the market place while positioning ourselves as a partner of choice for our clients," he said.

Chief financial officer Rajiv Bansal also blamed the volatile global currency market for Infosys' woes.

"Our hedging strategy helps us to minimise the volatility impact," he said.

''We have a healthy balance sheet with our cash and cash equivalents at $4.4 billion," he added.

Infosys has been losing market share to rivals like Tata Consultancy Services (TCS) and smaller rivals like HCL Technologies Ltd, which prompted it to change tact.

The company also is going slow on hiring with the aim of boosting profitability. Infosys added 1,059 employees during the quarter, the slowest pace of additions in three years as margins continued to be under pressure in the near term.

Infosys said billing rates fell 0.7 per cent in the fourth quarter from the December quarter and that it expected margins and pricing to be under pressure in the short term.

The company added 56 clients in the quarter, taking the total to 798, compared with an addition of 52 last year.

"We are confident, considering the deal wins in the last one year and the wins in the recent past, we feel that we are well positioned for the next year," Bansal added.