As anticipated, Infosys reported a healthy sequential growth of 4.5% in dollar-denominated revenue for the September 2011 quarter. What took the market by surprise was the company’s sharp improvement in its annual revenue and profit guidance in rupee terms.
The country’s second-biggest IT exporter expects to grow earnings per share in rupee terms by as much as 21.6% for FY12, much higher than its earlier anticipation of a 9% growth. While the revision led to the stock rising as much as 6% on Wednesday, investors need to note that the revised guidance is mainly a function of the rupee-dollar movement rather than any major improvement in demand scenario.
This is visible from a less aggressive revision in its dollar-denominated guidance. In dollar terms, Infosys has improved its forecast of EPS growth to 16.8% for FY12 from earlier 11.5%. It has also reduced dollar-denominated revenue expectations. In addition, even though the management has denied any signs of budget cuts, it has yet not dropped the word caution from the commentary.
The management has stated currency movements as a major driver behind the strong rupee-term guidance. The rupee weakened by over 10% against the dollar during the quarter. Some economists feel that the rally in the dollar may not continue given the US central bank’s attempts to stimulate growth in the local economy. Any subsequent fall of the dollar will also impact Infosys’s projections adversely.
On a positive note, the company seems to have finally returned on the growth trajectory after reporting numbers in the past few quarters that were lacklustre by its own standards. During the quarter, it added 45 clients, the highest in any of the six quarters to September 2011. Also, the business growth was seen across all its verticals. Even for the banking and finance vertical, which is under pressure due to debt troubles in Western countries, the sequential growth was 4.8%. Infosys’s guidance suggests that it expects a growth of over 5% in each of the remaining two quarters of the current fiscal, which is higher than what it has achieved in the first two quarters. This could mean that the top IT players may continue to report demand buoyancy in the near term.
Source - Economic Times
The country’s second-biggest IT exporter expects to grow earnings per share in rupee terms by as much as 21.6% for FY12, much higher than its earlier anticipation of a 9% growth. While the revision led to the stock rising as much as 6% on Wednesday, investors need to note that the revised guidance is mainly a function of the rupee-dollar movement rather than any major improvement in demand scenario.
This is visible from a less aggressive revision in its dollar-denominated guidance. In dollar terms, Infosys has improved its forecast of EPS growth to 16.8% for FY12 from earlier 11.5%. It has also reduced dollar-denominated revenue expectations. In addition, even though the management has denied any signs of budget cuts, it has yet not dropped the word caution from the commentary.
The management has stated currency movements as a major driver behind the strong rupee-term guidance. The rupee weakened by over 10% against the dollar during the quarter. Some economists feel that the rally in the dollar may not continue given the US central bank’s attempts to stimulate growth in the local economy. Any subsequent fall of the dollar will also impact Infosys’s projections adversely.
On a positive note, the company seems to have finally returned on the growth trajectory after reporting numbers in the past few quarters that were lacklustre by its own standards. During the quarter, it added 45 clients, the highest in any of the six quarters to September 2011. Also, the business growth was seen across all its verticals. Even for the banking and finance vertical, which is under pressure due to debt troubles in Western countries, the sequential growth was 4.8%. Infosys’s guidance suggests that it expects a growth of over 5% in each of the remaining two quarters of the current fiscal, which is higher than what it has achieved in the first two quarters. This could mean that the top IT players may continue to report demand buoyancy in the near term.
Source - Economic Times
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