There was a time when Infosys (Infy) was the IT bellwether in spite of being No.2, in terms of size and revenues, in the software services industry. It is no longer the bellwether. Yet, market analysts and industry experts eagerly await its results every quarter.
It will be no different today. When Infy’s CEO S D Shibulal announces the second quarter (Q2, July-September) results, there will be enhanced attention. And not just because the Infy report will kick off the results season or because Q2 happens to be the strongest quarter for IT companies.
It has been a full quarter since the return of N R Narayana Murthy for his second innings as chairman. And in the last two months, the high-profile company has seen five high-profile senior executives exit.
Given the 11% rupee depreciation during Q2, analysts expect all IT companies, including Infy, to report good results. Although Infosys increased wages in Q2, it is still expected to report marginal expansion of its margins. On average, analysts expect Infy to report a 10% on-year increase in Q2 sales and a 6-10% rise in guidance.
A BP Wealth Management report said, “Infosys is likely to boost sales guidance on dollar terms to 7-11% from 6-10% on increased demand in the US and rupee depreciation.” BP Wealth believes increase in dollar sales forecast and Infy’s commentary on the impact of US shutdown and the US immigration bill will be key.
Nitin Padmanabhan of Espirito Santo Securities in a note on Thursday said, “In addition to cuts in onsite costs, Infosys is clamping down on training and other costs... only a small part of these cost-cuts will be visible in margins, with Q3 and Q4 likely to reflect the benefit of these efforts.”
Espirito Santo expects Infy to report dollar revenue growth of 1.9% to $2.02 billion, with rupee growth of 11.8% to Rs12,599 crore. Net profit is estimated to be up 11% at Rs2,616 crore, while operating profit margins are expected to rise 26.3% or by 57 basis points.
Rumit Dugar and Udit Garg of Religare expect Infy to report dollar revenue growth of a modest 3% with EPS (earnings per share) growth of 9%, and raise dollar revenue guidance to 9% from 6-10%.
Ankita Somani of Angel Broking said, “Infy’s profitability is expected to increase by 15.1%, compared to 12.3% for TCS and 16.9% for Wipro.”