UPDATE 4-Infosys cuts revenue growth forecast on Europe woes, shares fall

* Q3 profit 23.7 bln rupees vs 23.1 bln rupees forecast

* Sees fiscal 2012 dollar revenue rising 16.4 pct

* CFO says Europe recovery not in sight, clients are cautious

* Shares fall 8.4 percent, biggest single-day fall in 9 months

By Harichandan Arakali

BANGALORE, Jan 12 (Reuters) - India's Infosys Ltd cut its annual revenue-growth outlook for a second time and warned of lower client spending due to the euro zone debt crisis, sending its shares down more than 8 percent, their biggest fall in nine months.

India's $76 billion software services sector is bracing for a slower pace of outsourcing contracts as its clients put off new investments due to the troubles in Europe, Infosys's second-biggest market.

Infosys, the No.2 Indian software exporter, forecast dollar revenue growth of 16.4 percent for the fiscal year to March 31, down from 17.1 percent to 19.1 percent projected in October. The company said it has seen business sentiment worsening marginally since November.

"The European crisis has a bigger impact on the global markets. (In the) U.S., even though the latest economic indicators are slightly positive, the overall environment is still recovering," Chief Financial Officer V. Balakrishnan said.

"Customers are very cautious...We believe that cautiousness will remain for sometime. The Europe recovery is not in sight and it's going to take a longer time."

For the third quarter, the Bangalore-based company beat market forecasts with a 33 percent rise in profit as a weak rupee boosted margins. It had first cut its revenue-growth outlook for this fiscal year in October.

"Europe is not showing signs of coming out of the woods any time soon and financial companies are under a lot of stress here," said Silkeborg, Denmark-based Mads Kaiser, a fund manager with JI India Equity Fund, which owns Infosys shares.

"Global corporates are very reluctant to spend on technology when their own bottomlines are under huge pressure. Everyone is playing the wait-and-watch game and that is really bad news for companies like Infosys."

Indian outsourcing firms count leading global financial companies such as Citigroup and Aviva among their clients. Royal Bank of Scotland on Thursday said it would axe 3,500 investment bank jobs.

Shares in Infosys, worth about $29 billion, ended down 8.4 percent at 2,588.25 rupees, their worst one-day percentage drop since April last year. The overall market closed down nearly 1 percent on Thursday.

Infosys, whose outlook and comments are seen as a barometer for the sector's health, also dragged down its local peers with sector leader Tata Consultancy Services Ltd and No.3 Wipro falling 4 percent and 2.5 percent, respectively.

"Its (Infosys's) prospect might not be as good as it has been over the last few years," said Michael Huang, manager of Yuanta India Fund, which owns Infosys shares, at Yuanta Securities Investment Trust in Taipei.

"But in the longer term, this is a company that has a solid track record of its management and financial quality."

Global spending on information technology will rise at the slowest pace in three years in 2012 as Europeans, worried about the region's sovereign debt crisis, are cutting back on investments, research firm Gartner Inc said last week.

Gartner predicted global IT spending would rise 3.7 percent in 2012, down from its earlier estimate of 4.6 percent. The forecast for Western Europe was slashed to a 0.7 percent drop in spending from a previously expected rise of 3.4 percent.

India's export-driven IT services industry competes with Accenture Plc and IBM for orders to maintain information technology infrastructure and build software applications.

More than half of Infosys's revenue is generated from the United States.

PROFIT RISES

Infosys, which is also listed in New York, said consolidated net profit rose to 23.72 billion rupees ($457 million) in the third quarter ended Dec. 31 from 17.8 billion rupees a year earlier, helped by an 8 percent fall in the rupee.

Revenue rose 30.8 percent to 92.98 billion rupees, as the company, whose customers include BP Plc, Procter & Gamble Co and Volkswagen AG, added 49 clients -- its strongest pace of client addition in more than three years.

A Reuters poll of 10 brokerages had forecast a profit of 23.1 billion rupees on revenue of 92.2 billion rupees.

Infosys said its operating margin rose 3 percentage points in the quarter from July-September to 31 percent, with a weaker rupee adding 4.4 percent to the margins in the third quarter.

The rupee was the worst performer among Asian currencies in 2011, losing nearly 16 percent against the dollar.

Infosys added 3,266 employees in the December quarter to take the total headcount to more than 145,000. Balakrishnan said the company was maintaining its earlier forecast of adding 45,000 gross employees in this fiscal year.

Tata Consultancy, which has recently seen its quarterly profit growing at a faster pace among the top three companies, is expected to report a 23 percent rise in third-quarter profit on Tuesday.

Infosys, the most favourite pick for fund managers among the top Indian companies, trades at 17.4 times its forward earnings, compared with 18.2 times for Tata Consultancy and 12.2 times for IBM, according to Thomson Reuters StarMine.