Shares of information technology (IT) companies fell for a second day, with Cognizant Technology Solutions’ SEC filing clouding revenue outlook for the sector.
Cognizant, in a filing to the US market regulator Securities and Exchange Commission (SEC), yesterday said its top executives would receive 100 per cent of their performance-linked shares if the company achieved revenue of $8.5 billion next year, a 16 per cent rise over its projected 2012 revenue.
The filing implies that CY13 growth would be lower than the company's outlook for CY12. “Based on historical trends, Cognizant’s annual guidance corresponds with revenue growth corresponding to 100 per cent of performance units,” IDFC said in a note.
| FUTURE TENSE Information technology stocks declined on Cognizant’s SEC filing, which clouded the revenue outlook for the sector | |||
| 6-Dec-12 | %chg* | YTD chg (%) | |
| HCL Technologies | 625.54 | -2.03 | 61.12 |
| Infosys | 2338.50 | -1.84 | -15.43 |
| TCS | 1282.40 | -1.14 | 10.43 |
| Wipro | 379.75 | -0.33 | -4.78 |
| BSE IT Index | 5700.25 | -1.37 | -0.90 |
| Sensex | 19486.80 | 0.49 | 26.09 |
| *change over previous closed Source: BS Research Bureau | |||
Barclays Capital, however, feels while Cognizant would see a slowdown, it does not pose an incremental risk to Barclays’ FY14 growth forecasts of 15 per cent for Tata Consultancy Services (TCS) and 13 per cent for HCL Technologies.
“Cognizant’s growth premium to Indian IT vendors has diminished in the past two years due to its larger revenue and growth base,” Barclays Capital said in a note.
An additional negative may come from the rupee. Credit Agricole believes the government winning the vote on foreign direct investment in multi-brand retail will continue to help rupee. It expects the rupee could rise to 52 a dollar by end-2013.