admitting that he was disappointed by Infosys’ below-par growth, Executive Chairman Narayana Murthy said Infosys has to become more cost competitive and it will take anywhere from 6 to 18 months before results are visible
MUMBAI : Shares of Infosys were the worst performers on Nifty after Chief Executive Officer S.D. Shibulal indicated that the company’s revenue for 2013-14 (Apr-Mar) is likely to be at the lower end of its guidance of11.5-12.0%.Infosys ended down 8.5% at Rs 3,357 after hitting a three-month low of 3,340 rupees intraday.
The tech major said that unanticipated factors, especially in retail and hi-tech manufacturing, have led to a slowdown in its Jan-Mar revenue.
Most analysts had raised their full-year revenue growth estimate for Infosys two months ago to 12.5-13.0% from about 11.5% after Infosys reported higher than expected second- and third-quarter revenues. The stock had, since then, narrowed its valuation gap with peer Tata Consultancy Services Ltd.
Infosys Chief Executive Officer S.D. Shibulal said the company also faced difficulties with some of its clients outside these verticals. “At a broad level, some of our clients have seen slowdowns in their business across industry verticals, leading to unanticipated project ramp downs and cancellations of our projects with them in the fourth quarter,” he said.
“We have also seen mismatches between skills that clients need and what we have, and that has led to slowdown in ramp ups. These factors are leading to a decline in business momentum for us during the quarter.”
Shibulal, who was speaking to analysts at a meeting organised by Barclays in Infosys’ Bengaluru campus, said the company and its clients have not finalised their work plans for the next financial year, but there was a possibility that any weakness in the current quarter could spill over into the next financial year.
On retail, Shibulal said clients may spend less in 2014 as their spending power has been hit by bigger than expected promotions and discounts last year. Spending has slowed down in the last two months, he said.
In addition, a slowdown in retailing in emerging markets and client-specific issues are also expected to keep spending by retail and consumer companies under pressure, he said.
Infosys Executive Chairman N.R. Narayana Murthy said the company wanted to flag these issues in keeping with its policy of moving bad news by the elevator even as good news takes the stairs.
“Our growth rate went down because we were not as focused on large outsourcing projects which are highly competitive and which require us to improve our cost base,” Murthy said.