Infosys share selloff: SBI pips IT major to become 7th most-valued company on D-Street

With Infosys shares taking a beating in Friday's trade, its market capitalisation fell below that of India's largest state-run lender State Bank of India (SBI) at the time of writing this report. At 2.54 pm, Infosys was commanding a market capitalisation of Rs 5,49,257 crore, which was lower than SBI's Rs 5,49,845 crore. This made SBI the seventh most-valued firm on the Dalal Street.

Shares of SBI were trading 1.03 per cent higher at Rs 616.25 while those of Infosys were down 8.64 per cent at Rs 1,323.60. SBI last managed to get past Infosys in the m-cap race on May 17 this year. On that day, SBI commanded a m-cap of Rs 5,23,428.48 crore against Infosys' Rs 5,17,676.12 crore, data compiled from corporate database AceEquity suggests.

Many brokerages have cut price targets on Infosys, which suggests a potential downside. Nomura India said the IT firm is set to underperform industry growth in FY24. It has downgraded the stock to 'Reduce' while suggesting a target of Rs 1,210 from 1,450.

"Soft and uncertain demand environment has led to pessimism on growth. Despite robust orderbook, actual transitioning to revenues seems obscure and is a headwind," said Elara Securities, which has a target of Rs 1,230 on the stock.

A sudden sharp cut in revenue growth guidance in 1QFY24 is surprising for a company at the top of the game and leading growth charts, Kotak Institutional Equities said.

"This does warrant a closer scrutiny although there is nothing in metrics that suggests loss of competitiveness or wallet share. We cut FY2024-26E revenue forecast by 2-3 per cent and FY24 CC revenue growth forecast to 3.3 per cent from 4.9 per cent earlier. We cut EPS estimates by 2-3 per cent baking in lower growth and marginal cut in margins, offset by change in INR/USD assumption," it said.

An average target price on SBI at Rs 718, on the other hand, suggests a 17 per cent potential upside ahead. Macquarie has downgraded the stock to 'Underperform' with a target of Rs 1,130.

Infosys revised downward its FY24 CC revenue guidance to 1-3.5 per cent compared with 4-7 per cent suggested earlier. It maintained its Ebit margin guidance at 20-22 per cent. While a few brokerages did anticipate some downward revision in revenue guidance, a 1-3.5 per cent growth target missed their forecasts by a wide margin.

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