Infosys to lay off 3,000 staffers as RBS cancels plans

Technology firm Infosys said today it would lay off about 3,000 persons following a decision by the Royal Bank of Scotland to cancel a project to set up a separate bank in the United Kingdom.

RBS announced last week that it will not pursue its plan to separate and list a new UK standalone bank, Williams & Glyn (W&G), for which Infosys was a key technology partner.

"Infosys has been a W&G program technology partner for consulting, application delivery and testing services, and subsequent to this decision, will carry out an orderly ramp-down of about 3,000 persons, primarily in India, over the next few months," Infosys said in a statement.

Infosys shares slumped about 3 per cent as the cancellation of the deal is likely to hit Infosys revenue and earnings per share during the current fiscal year, analysts said.

"Our calculations suggest that this could impact FY17 revenue by $50-100 million and FY18 by $100-200 million. While Infosys is attempting to compensate for this loss with other contracts of RBS, market conditions and the extent of the loss are likely to make this tougher," brokerage CLSA told NDTV.

The loss of the five-year £300-million RBS deal could force Infosys to downgrade its FY17 revenue guidance for the second time this year, analysts said. Infosys had in July cut its annual sales outlook citing weak demand, which triggered a selloff in the stock. Infosys shares are down 10 per cent since July 14.

However, analysts told NDTV Profit that the weakness in Infosys shares is a good opportunity to accumulate the stock.

"The RBS deal accounts for just 0.4 per cent of Infosys' consolidated revenue... These are all normal business events, one should not give too much importance," said G Chokkalingam of Equinomics Research & Advisory.