(In paragraph 5, adds dropped word "billion")
* Sees FY14 dollar revenue up 6-10 pct, less than expected
* Shares on track for biggest one-day fall in 10 years
* Q4 net profit 23.9 bln rupees vs consensus 23 bln rupees
By Harichandan Arakali
BANGALORE, April 12 Infosys Ltd
forecast full-year sales growth that missed analyst expectations
by a margin of up to 50 percent, dimming investor hopes that
India's No.2 software services firm will soon start reaping the
benefits of its strategic revamp.
Infosys forecast on Friday dollar revenue to grow between 6
percent and 10 percent for the fiscal year that began this
month. That was less than analysts' estimates for revenue growth
of as much as 12 percent, and slower than a gain of 12 to 14
percent expected for the overall industry. Shares of Infosys
tumbled as much as about 20 percent.
The company, which had been losing market share for about
two years to industry leader Tata Consultancy Services Ltd (TCS)
and smaller rivals like HCL Technologies Ltd,
has cut its pace of hiring to the slowest in three years with
the aim of boosting profitability. Yet Infosys said on Friday
that margins will be under pressure in the near term.
"The (revenue) forecast looks quite conservative, which is a
concern. Fiscal 2013 was also not very good for Infosys," said
K.K. Mital, CEO for portfolio management services at Globe
Capital in New Delhi. "This looks like company-specific problem.
Even mid-cap companies are expected to perform better than
Infosys, once seen as a trend-setter for India's $108
billion outsourcing services industry, has turned in a string of
disappointing results, except for in January when it surprised
the market by raising its outlook.
The rough patch was caused in part by the challenge of
implementing its "Infosys 3.0" push for revenue through the
development of its own software platforms, to differentiate its
services from those of its competitors, amid sluggish demand
from clients in its core western markets.
In a sign that this strategy has yet to deliver, its
products and platforms services contributed 5.7 percent of its
overall revenue in the March quarter, down from 6.2 percent a
Infosys lost more than $5 billion in market value after the
forecast was announced, with its shares on track to post their
biggest single-day percentage fall since April 2003.
Consolidated net profit for the fiscal fourth quarter ended
March 31 was 23.9 billion rupees ($438 million), compared with
23.16 billion a year earlier. Revenue for the quarter rose 18
percent to 104.5 billion rupees.
That compared with an average estimate of 23 billion rupees
in a survey of 18 analysts by Thomson Reuters I/B/E/S. Revenue
was estimated to grow 21 percent to 107 billion rupees.
Infosys said it expected margins and pricing for its
services to be under pressure in the short term, after reporting
that billing rates fell 0.7 percent in the fourth quarter from
the December quarter.
Analysts also said the absence of an outlook for earnings
per share from the company, which stopped giving quarterly
forecasts last year, was a reflection of uncertainty.
The company added 56 clients in the quarter, taking the
total to 798, compared with an addition of 52 last year.
"We are confident, considering the deal wins in the last one
year and the wins in the recent past, we feel that we are well
positioned for the next year," Rajiv Bansal, chief financial
officer, told reporters.
Infosys also said it would set aside up to $100 million to
invest in products, platforms and solutions ideas.
"Because of this volatility we also understand that growth
is the biggest challenge for us and that we've to get the growth
back, which will require some investment, accelerating
investments in the marketplace, also differentiate our service
offering," Bansal said.
Infosys said it added 1,059 employees during the quarter,
the slowest pace of additions in three years, in what could be a
sign of the times in which India's IT outsourcers are looking to
trim down on the hordes of entry-level staff.
Infosys is the first in the sector to report quarterly
earnings. TCS is expected to report a 22 percent rise in
fourth-quarter net profit on Wednesday, while third-ranked Wipro
is seen posting a 15 percent rise on Friday, according
At 0725 GMT, Infosys shares were trading down 19.7 percent.
Shares of Wipro fell 4.8 percent and TCS lost 3 percent. The
broader market was down 1.7 percent.
($1 = 54.5 Indian rupees)
(Writing by Aradhana Aravindan; Additional reporting by India
Company News team; Editing by Chris Gallagher)