Infosys Plunges After Murthy’s Sales Growth OutlookAmeya Karve
Infosys Ltd. plunged the most in 11 months after Chairman N.R. Narayana Murthy told investors annual sales growth may be at the lower end of its projections and lag behind industry forecast.
“We are not very happy with our performance over the last two years,” Murthy said at an investors meet organized by Barclays Plc in Bangalore yesterday. “The second matter of concern for us has been the coming down of our operating margin.”
Shares of India’s second-biggest software exporter slumped 8.5 percent to 3,357.60 rupees in Mumbai today, the biggest loss since April 12 and lowest level since Dec. 9. The benchmark S&P BSE Sensex index declined 0.4 percent.
Murthy, who returned as chairman in June with a mission to revive sales growth, said revenue is likely to rise 11.5 percent in the year to March 31, slower than the 13 percent predicted for the industry by lobby group Nasscom. In his second stint, Murthy has shuffled top management after some executives including the company’s U.S. head and a director quit last year.
In January, the company had forecast sales to rise between 11.5 percent and 12 percent.
The company’s operating profit fell 5 percent to $1.91 billion in the financial year ended March 31, 2013 from a year earlier, according to a filing. For the nine months through December, the operating profit declined 0.5 percent to $1.45 billion from the same period a year ago.
Infosys shares have gained 39 percent since June 1, when Murthy returned as company chairman, the lowest among India’s top four software exporters.
Bigger rival Tata Consultancy Services Ltd. has risen 43 percent in the same period, while smaller competitor Wipro Ltd. has surged 72 percent and HCL Technologies Ltd. jumped 96 percent. The S&P BSE India Information Technology Index, a gauge of 10 software companies, has increased 48 percent.
The software maker’s performance over the past couple of years suggests “company-specific challenges,” Citigroup Inc. said in a research note dated yesterday, while Macquarie Group Ltd. said the management’s guidance on dollar-based revenue could lead to doubts over Infosys’ ability to reduce the gap with “industry leaders.”
Sales in dollar terms may rise 10 percent in the financial year starting April 1, compared with an earlier estimate of 13.4 percent, Deutsche Bank AG said separately, maintaining its hold rating while cutting its 12-month price target by 5.3 percent to 3,600 rupees.