Infosys tanks 12%, hits 52-week low on disappointing March quarter results

The company's performance was subdued owing to unplanned project ramp-downs and delays in decision-making by the clients.

Shares of Infosys hit a 52-week low of Rs 1,222, as they tumbled 12 per cent on the BSE in Monday’s intra-day trade after the company reported a disappointing set of numbers for January-March quarter (Q4FY23), with consolidated net profit up 7.8 per cent year-on-year (YoY) to Rs 6,128 crore. This was against Rs 5,686 crore in the year-ago period. The profit declined 6.9 per cent on a sequential basis.

Infosys’s share price fell below its previous 52-week low of Rs 1,355.50, touched on September 26, 2022. Thus far in the calendar year 2023, the stock has underperformed the market with a 18 per cent decline. In comparison, the S&P BSE Sensex was down 2 per cent during the same period.

At 09:35 AM, Infosys quoted 11.7 per cent lower at Rs 1,226, with around 6.65 lakh shares traded at the counter on the BSE. 

Infosys reported weak numbers on the revenue front as its revenue during the quarter declined 3.2 per cent quarter-on-quarter (QoQ) & grew 8.8 per cent YoY in constant currency (CC) terms. In dollar terms, revenue was down 2.3 per cent QoQ & up 6.4 per cent YoY to $4,554 million while in rupee terms it reported revenue of Rs 37,441 crore, down 2.3 per cent QoQ & 16 per cent YoY.

Infosys missed Bloomberg estimates on both revenue growth and net profit for the quarter. Bloomberg had estimated revenue to be Rs 38,769 crore and net income at Rs 6,612 crore.

Infosys’ performance during the quarter under review was subdued owing to unplanned project ramp-downs and delays in decision-making by the company’s clients. The IT major’s revenue growth guidance for FY24, in the range of 4-7 per cent, was lower than Street expectations, and much below the rise the company clocked in FY23.  Margin guidance for FY24 is in the range of 20-22 per cent, against the street estimates of 21-23 per cent.

Infosys weak performance in Q2 was primarily due to broad-based reduction in business volumes, led by unplanned project ramp downs and delays in new businesses during the early part of Q4. Additionally, the company saw one-off project cancellations and issues with a few clients, primarily on discretionary spending, which it expects to recover in Q1FY24. Further, total contract value (TCV) for large deals in Q4 stood at USD2.1b, down 37 per cent quarter on quarter (QoQ), Motilal Oswal Financial Services (MOFSL) said.

The brokerage firm expects the big revenue miss and elevated uncertainty to adversely impact the stock’s short-term performance, resulting in a negative reaction from high single to low double digit, on account of the disappointment.

“We expect FY24 revenue growth to be around 5.2 per cent YoY in CC terms, which is near the lower end of guidance band, as it takes time for the mega deal opportunities to convert into order and revenues. The delay in revenue growth will likely push the recovery for Infosys to FY25, once the demand environment becomes more favorable,” MOFSL said in its result update.

Analysts at ICICI Securities maintain ‘Buy’ rating on Infosys with a target price of Rs 1,600 per share. “Differentiated digital and cloud capabilities to drive growth. Growth remained broad-based and deal momentum robust, with digital transformation rapidly getting scaled up across verticals and regions. Infosys is likely to post rupee revenue growth of 10.3 per cent CAGR in FY23-25E. Double-digit return ratios, strong cash generation and healthy payout,” are key triggers for future price performance, the brokerage firm said in the result update.