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04-12-2012, 04:10 PM #1
Investors expect Infosys to post 11-13% growth in Q4
All eyes are on Infosys' 2012-13 full year guidance as India's second-largest IT exporter readies to kick off the technology earnings calendar for the three months to March on Friday.
Investor expectations are muted. Discretionary spending has slowed and so have project ramp ups. But more than anything else, the firm's management, famous for its conservatism, is likely to be even more cautious - Infosys had initially aimed for 20 per cent growth in 2011/12 but had to revise that estimate downwards to 16 per cent as the year progressed. In the December quarter, the firm guided to full year revenues in the range of $7,029 million and $7,033 million.
Most market watchers, therefore, expect the company to target more realistic 11-13 per cent growth in 2012-13, in line with industry lobby Nasscom's predictions. While the macros in many parts of the world are looking better, enterprises are still exercising caution on big technology spending. According to Sanjeev Hota, analyst with brokerage house Sharekhan, the spend-to-budget ratio will be crucial to watch this year.
"TCS has indicated that spend was 80-85% of the budgets in 2011. It could be the same in 2012," he told Business Today.
Infosys's full year guidance will also point to whether the firm could retain its revenue lead over Cognizant. Investors will keenly watch the management's commentary on growing visa troubles, besides the company's hiring numbers for this year. Incidentally, the hiring figure is keenly watched by the hardware industry as well - IT hiring has become a barometer to judge how the PC industry, for instance, will perform.
As for the March quarter, Infosys is likely to lag arch rivals Wipro and HCL Technologies in volume growth. Most analysts see flat volume growth while revenues could be up 1 per cent in dollar terms compared to the December quarter. The expectations are in line with Infosys' revenue guidance last quarter.
"We are expecting 0.9 per cent revenue growth in the fourth quarter considering that discretionary spending is down. Infosys has higher exposure to discretionary spending than its peers. Pricing for the quarters is expected to be flat and so will be the volumes," Aniruddha Mehta, of brokerage firm IIFL, said.