Bloomberg News

Infosys Cuts Dollar Sales Forecast, Cites Global Economy, Europe

January 12, 2012

Jan. 12 (Bloomberg) -- Infosys Ltd., India’s second-largest software exporter, cut its full-year forecast for sales in dollar terms for a second straight time because of weaker economic growth in its main markets including Europe.

Sales in the year ending March 31 will range from $7.029 billion to $7.033 billion, Bangalore-based Infosys said today. That compares with the $7.08 billion to $7.2 billion it forecast in October.

The stock fell the most in two months in Mumbai trading after the forecast cut at Infosys, which relies on Europe and North America for more than 80 percent of revenue. Co-Chairman S. Gopalakrishnan predicted in November that some customers may cut their information technology budgets in 2012 amid global economic uncertainty, while researcher Gartner Inc. forecast a slowdown in information technology services spending this year.

“Clearly, the business environment seems to be quite challenging” for IT-services providers, said Manish Sonthalia, who manages $250 million in equities at Mumbai-based Motilal Oswal Asset Management Co. “That does not give too much confidence from a stock market point of view.”

Infosys dropped as much as 7.7 percent, the largest intraday decline since Nov. 11, and traded 6.8 percent lower at 2,634.80 rupees as of 9:58 a.m. in Mumbai. The stock was the biggest contributor to the the benchmark Sensitive index’s 0.4 percent decline and the second-worst performer on the MSCI Asia Pacific Index.

European Crisis

“The global economy, driven by slower growth in developed markets coupled with the European crisis, could impact the growth of the IT industry,” Chief Executive Officer S.D. Shibulal said in a statement.

Worldwide spending on IT services will increase at a slower pace of 3.1 percent this year, after climbing 6.9 percent in 2011, Gartner said Jan. 5.

The company, which designs software programs, maintains computers and provides IT and outsourcing services for clients including BT Group Plc, said sales in the fourth quarter may range between $1.806 billion and $1.810 billion.

Infosys’s third-quarter profit beat analysts’ estimates as the rupee’s decline boosted the value of repatriated earnings.

Net income rose 33 percent to 23.7 billion rupees ($458 million) in the third quarter ended Dec. 31, surpassing the 22.8 billion-rupee median of 44 analyst estimates compiled by Bloomberg. Revenue rose 31 percent to 93 billion rupees, exceeding the 91.7 billion-rupee median of 48 analyst estimates.

“They beat some estimates because of forex, not because of improvements in their core business,” said Pralay Kumar Das, an analyst at Elara Securities Ltd. in Mumbai. “What the market looks at though is the future.”

Rupee Sales Outlook

The company raised its outlook for sales in rupee terms. Full-year revenue will range from 342.7 billion rupees to 342.9 billion rupees, higher than the October projection of 335 billion rupees to 340.9 billion rupees.

The rupee’s 7.7 percent decline against the dollar in the three months ended Dec. 31 would have boosted margins at India’s software exporters, Pratik Gandhi, an analyst at IDBI Capital Markets Services Ltd. in Mumbai, said before the earnings were released.

Shares of other Indian IT-services providers also fell. Market leader Tata Consultancy Services Ltd. dropped 4.2 percent to 1,089.85 rupees and Wipro Ltd. lost 2.6 percent to 391.05 rupees.

--Editors: Suresh Seshadri, Lena Lee

To contact the reporter on this story: Ketaki Gokhale in Mumbai at kgokhale@bloomberg.net

To contact the editor responsible for this story: Michael Tighe at mtighe4@bloomberg.net


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