IT heavyweight Infosys cut its sales forecast more deeply than expected as global economic uncertainty eroded tech spending, depressing its shares as much as 10 percent and slamming hopes for a second-half recovery.
While Infosys's June quarter net profit rose 33 percent as expected, rival Tata Consultancy Services
The dull global economy, heavy competition for market share and sharp currency fluctuations have slowed the pace of growth for Indian outsourcing companies, although in recent quarters Infosys has been underperforming key rivals, including market-leading TCS.
Infosys, India's No.2 software services exporter, had long been considered the industry bellwether for its habit of achieving and usually exceeding revenue forecasts.
TCS, part of the Tata Group conglomerate that stretches from cars and hotels to salt and steel, does not make forecasts.
Infosys, noting a sharp fall in pricing, said it sees revenue in dollar terms rising 5 percent to $7.34 billion in the fiscal year to March 2013, down from its April estimate of 8-10 percent growth.
Most analysts were expecting Infosys to trim its growth forecast to 6-8 percent.
"Infosys' guidance is bad and it will have implications for the sector as well. It clearly reflects a slowdown in Europe and in the United States and (problems with) the company's internal policies," said Paras Adenwala, a fund manager at Capital Portfolio Advisors.
Infosys shares fell as much as 10.2 percent to 2,219 rupees, their lowest in nearly three months, before ending the day 8.36 percent lower. TCS shares ended 1.77 percent lower ahead of the results, and the NSE sectoral index closed down 5.15 percent.
"We were expecting the guidance to be cut by 200 basis points, but it's much worse than that. Demand outlook for Infosys has worsened considerably," said Ankur Rudra, an analyst at Ambit Capital. "We think this is highly company-specific; expect relatively stronger results from its peers."
Infosys, whose customers include Bank of America
Revenue rose 28.5 percent to 96.16 billion rupees as it added 51 clients in the quarter. It added a net 1,157 employees, lifting its headcount to 151,151.
By comparison, TCS posted net profit of 32.8 billion rupees, topping analysts' forecasts of 30.5 billion rupees, on a 37.7 percent increase in revenue to 148.69 billion rupees. It added 29 clients and 4,962 staff, bringing its workforce to 243,545.
LATEST DISAPPOINTMENT
After it gave disappointing guidance during its April results announcement, Infosys came under fire from investors for what some said was an overly conservative approach that put it at a disadvantage to rivals, adding to pressure on CEO S.D. Shibulal, who took the reins last year.
Infosys also held on to cash of $3.7 billion at the end of June, making some investors restless over its unwillingness to make a big acquisition or return some cash to shareholders.
"If you look at the environment, it's still very uncertain," Shibulal told reporters on Thursday.
"In the financial services industry, in which we have 34 percent dependency, there were multiple events. I think sitting here in April, we couldn't have foreseen any of the events. The pipeline continues to be OK, but the question is how fast we can close (orders)," he said.
Pricing over the quarter fell 3.7 percent from the previous quarter and the company is seeing "sporadic pricing renegotiations" and demands for discounts, Shibulal said.
Infosys, TCS and Wipro
India's $100 billion-a-year IT and back-office outsourcing sector earns about three-quarters of its revenues from customers in the United States and Europe and faces intense competition from global rivals including IBM
Casting further gloom over the sector, U.S. automaker General Motors
Infosys does not have significant exposure to GM.
