Shares of Infosys declined more than 6% to ₹1,628 apiece on the BSE in Monday’s opening deals after its Q4FY22 results came below expectations. Infosys’ market capitalization fell to ₹6,92,281 crore on the BSE, with its investors losing over ₹40,000 crore in early deals. Nifty IT index declined the most and was down nearly 4%.
India’s second biggest IT service provider Infosys’ net profit rose 12% to ₹5,686 crore for the quarter ended March from ₹5,076 crore in the year-ago period while its revenue grew nearly 23% to ₹32,276 crore as compared to ₹26,311 crore year-on-year (YoY).
Infosys’ margin performance in the March quarter was poor on impact from lower utilisation, and also due to client contractual provisions and third party costs.
“Going forward, the headwinds on margins are increase in travel, facility, communication expenses, higher onsite/offsite wage revision; and declining employee utilisation rates. Tailwinds are pyramid optimisation, improvement in Daimler profitability, reducing sub-con costs, and pricing power,” said analysts at ICICI Securities.
Elevated margin pressures along with slowing revenue/TCV momentum in tandem with macro environment has lead the brokerage to retain uts Reduce rating on Infosys shares with a target price of ₹1,570 (earlier: ₹1,628).
Infosys has projected 13-15% revenue growth for the current fiscal amid a robust deal pipeline and continued demand for digital and cloud computing services. The company has an operating margin guidance of 21%-23% for FY23.
Those at Edelweiss believe this quarter’s slower growth is just an aberration in the strong-medium term growth trajectory and have maintain ‘BUY’ rating on the IT stock with a twelve-month target price of ₹2,426, as the management highlighted that the demand environment remains robust and they are witnessing a significant pipeline of large deals.
The views and recommendations made above are those of individual analysts or broking companies, and not of Mint.
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