Trump & Brexit blues hit Infosys
Mail Today Bureau October 15, 2016
Infosys Ltd cut its annual revenue growth target for the second time in three months as India's IT software services exporters have run into a headwind of major Western customers holding back on spending amid uncertainties created by Donald Trump's brash statements in the U.S. presidential campaign and the post-Brexit turmoil in Europe.
While the company reported a 6.1 percent growth in second quarter profit at Rs 3,606 crore it said on Friday that it now expects revenue to grow between 8 percent and 9 percent during the current financial year.
Infosys, the second-largest player in India's $150 billion-plus software services outsourcing industry, Infosys had cut its guidance as recently as in July, to 10.5-12 percent growth. It had also warned that it was seeing some "softness" after Britain voted to leave the European Union in June.
"During the course of Q2 we have seen signs of cautious client behaviour," said on a conference call. Royal Bank of Scotland's decision to shelve a plan to list a new bank in Britain, for which Infosys was a technology partner, also contributed to the lowering of revenue guidance, Sikka said.
Firms like Infosys and industry leader Tata Consultancy Services Ltd (TCS) depend on North America and Europe for a major chunk of their revenue. TCS on Thursday had reported Trump & Brexit blues hit Infosys Country's second largest IT major cuts growth forecast to single digit figure lower-than-expected revenue growth and warned clients were delaying spending.
The lowered outlook initially startled investors, sending shares more than 5 percent lower before they pared losses.
The firm's shares, however, recovered and were trading 1.9 percent lower. Investors took the view that a sector that is a showpiece of the Indian economy is still well placed in the longer term.
"We don't believe that the structural story of outsourcing has changed," said Nilesh Shetty, a fund manager at Quantum Asset Management Company Pvt Ltd. "The engineering talent in India is still priced a lot lower than the developed world."
For its fiscal second quarter ended September Infosys had a revenue of Rs 17,310 crore, which grew 10.7 per cent over the same period last year.
The company added 78 clients during the three months to September, taking its total number of active clients to 1,136.
Sikka said the company had won large orders of over $ 1.2 billion in the quarter, which was good in a "difficult and structurally challenging time"
The lower forecast is also expected to force software lobby Nasscom to reduce its growth estimates for the $ 108 billion Indian tech industry. In April, the industry body had projected 10-12 per cent growth for the year ahead.
Larger rival Tata Consultancy Services (TCS) on Thursday called the second quarter "unusual" saying that there is caution among customers due to 'growing uncertainties in environment'. The company had reported an 8.2 per cent increase in profits at Rs 6,586 crore as revenue grew 7.8 per cent to Rs 29,284 crore
Sikka said while Infosys continues to navigate an uncertain external environment, we remain focused on executing our strategy and increasing momentum of our software plus services model.
``Considering our performance in the first half of the year and the near-term uncertain business outlook, we are revising our revenue guidance," he added.