Infosys: Is the worst over?
Big day for Infosys tomorrow. The Tech bellwether will announce its financial results. We delve why these may not be the best of times for Infy.
The rupee rose more than 6 percent; salaries swelled and so did visa costs. All that's expected to show on the tech company earnings in the June quarter. Infosys might report a net profit fall from the previous quarter and it might even miss its first quarter earnings per share or EPS guidance.
Bhavin Shah, JP Morgan, said, "The EPS will come in 5-7 percent below guidance in our view; they might even revise dollar guidance up but re guidance could be revised down in revenue terms by 1%, the EPs guidance by 3% so 17-19% so EPS guidance of below 80/share."
But will the earnings revision have an adverse impact on the stock? Most brokers feel the worst is over for the sector as it enters the strongest period of the year, though some feel Infosys will stick to its 80-rupee EPS guidance.
Sanju Verma, HDFC Securities, believes, "What a lot of people are accounting is the fact that the billing growth rate year on year is likely to be 5% odd and the utilization rate, the more imp parameter is likely to see a 2% growth and i think if they both come on track it will be a huge positive"
The consensus on the street is the worst is over. But if the Infosys management says it's confident of holding on to its original EPS guidance for this fiscal the sector could see a re-rating.
2 comments:
rupee appreciation - this is the thing infy to keep upto them..they has to manage themself, not broadcasting these things..
are infy praying to fall ruppee against dollars..?
where is the silly guys, still making revenue from only BPO...they haven't any manpower to keep their software arm up...are they cant one here?
i didn't find any long-term vision to infy..simply these all are cooly peoples!
Infosys BPO has rising problems. Quarterly data for FY06 and FY07 shows that profits at Infosys BPO
grew slower than revenues leading to a profit margin slide, and
employee utilization plunged resulting in a large bench.
Simultaneously, employee and customer satisfaction scores fell leading to attrition and delivery issues.
The problem seems to be managerial and caused by the exit of the
senior team at the former Progeon (10 VPs have quit since
the buyout) and their replacement by Infy middle to senior managers
who don't have BPO experience.
So while Infosys BPO revenues and employee headcount are growing (the latter alarmingly), the more BPO grows, the more it drags down the Infosys group's
productivity and net margin.
PS. Q1FY08 results show that Infy BPO recorded a PAT of Rs 36 crore on revenues of Rs 200 crore. That is a net margin of 18% in a company that used to do 24% last year. Expect heads to roll!
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