Wednesday / December 4.
HomeBiz TechInfosys cuts revenue outlook again as clients slow spending ahead of U.S. election, Brexit

Infosys cuts revenue outlook again as clients slow spending ahead of U.S. election, Brexit

By Sankalp Phartiyal and Anya George Tharakan | MUMBAI/BENGALURU

MUMBAI/BENGALURU Infosys Ltd cut its annual revenue growth target for the second time in three months as India’s software service exporters feel the pinch of major Western clients holding back on spending as they wait to see how November’s U.S. presidential election and Europe’s Brexit drama play out.

While it reported second-quarter net profit grew 6.1 percent, the second-largest player in India’s $150 billion-plus software services outsourcing industry said on Friday it now expects revenue to grow between 8 percent and 9 percent in constant currency terms in the fiscal year through March 2017.

The lowered outlook initially startled investors, sending shares more than 5 percent lower before they pared losses. Infosys had cut its guidance as recently as July, to 10.5-12 percent growth, warning in August it was seeing some “softness” after Britain voted to leave the European Union in June.

Firms like Infosys and industry leader Tata Consultancy Services Ltd (TCS) depend on North America and Europe for the majority of their revenue. TCS on Thursday reported lower-than-expected revenue growth and warned clients were delaying spending.

“During the course of Q2 we have seen signs of cautious client behaviour,” Infosys Chief Executive Vishal Sikka said on a conference call. Royal Bank of Scotland’s decision to shelve a plan to list a new bank in Britain, for which Infosys was a technology partner, also contributed to the lowering of revenue guidance, Sikka said.

At 0921 GMT, the firm’s shares were trading 1.9 percent lower. Investors took the view that a sector that is a showpiece of the Indian economy is still well placed in the longer term.

“We don’t believe that the structural story of outsourcing has changed,” said Nilesh Shetty, a fund manager at Quantum Asset Management Company Pvt Ltd. “The engineering talent in India is still priced a lot lower than the developed world.”

For its fiscal second quarter ended September, Infosys said consolidated net profit rose to 36.06 billion rupees ($542 million) under Ind AS accounting standards, ahead of analysts’ estimates of 35.26 billion rupees.

Revenue rose 10.7 percent to 173.1 billion rupees.

The company added 78 clients during the three months to September, taking its total number of active clients to 1,136.

($1 = 66.5919 Indian rupees)

(Additional reporting by Promit Mukherjee and Devidutta Tripathy in Mumbai, Laharee Chatterjee in Bengaluru; Editing by Kenneth Maxwell)

Next In Money News

Russia’s Gazprom sees new LNG deal with India’s Gail in six months

GOA, India Russia’s Gazprom CEO Alexei Miller said on Saturday he hoped to renegotiate a deal to supply liquefied natural gas to India’s Gail (India) Ltd within the next six months.

Volkswagen to pay $175 million to U.S. lawyers suing over emissions

WASHINGTON Volkswagen AG , in another step to move past its costly diesel emissions cheating scandal, has agreed to pay $175 million to U.S. lawyers suing the German automaker on behalf of the owners of 475,000 polluting vehicles, two people briefed on the agreement said on Friday.

Nearly 200 nations agree binding deal to cut greenhouse gases

KIGALI Nearly 200 nations have agreed a legally binding deal to cut back on greenhouse gases used in refrigerators and air conditioners, a major move against climate change that prompted loud cheers when it was announced on Saturday.

Let’s block ads! (Why?)