Infy to Clarify Guidance After September
Analysts expect further cut in revenue projection
Infosys on Friday said it would provide a clearer revenue growth guidance after September.
The management also said in an analyst meet the company’s performance in the second quarter would be better than in the first.
The management also said in an analyst meet the company’s performance in the second quarter would be better than in the first.
However, several analysts said another guidance cut could be in the offing.
| GUIDING GROWTH |
Positives
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Infosys also acknowledged the cancellation of the RBS contract was an instance of wariness among financial clients over Brexit. The company said it saw softness in some clients that were not anticipated at the beginning of the quarter.
Infosys has said it expects revenue in 2016-17 to grow between 10.5 per cent and 12 per cent in constant currency, lower than the 11.5-13.5 per cent band it expected at the beginning of the financial year.
Earlier this month, Infosys said the Royal Bank of Scotland would no longer pursue its plan to separate and list a new UK bank, Williams & Glyn. Infosys has been a Williams & Glyn technology partner for consulting, application delivery and testing services and will subsequent to this decision wind down 3,000 jobs, primarily in India, over the next few months.
“We did not see the RBS ramp-down coming at the start of the quarter. We are seeing softness in some clients, post-Brexit, which was not anticipated at the start of the quarter. We want to see if RBS is a one-off,” Vishal Sikka, CEO, Infosys, told analysts.
Analysts present at the meet said the management sounded more cautious. “They did say that client-specific issues were in Europe but not restricted to Europe. There are a few cases outside Europe as well,” said an analyst.
“Our performance both in terms of market share and the overall deal pipelines remains strong. We have been on a good trajectory in the last few quarters and I expect this to continue. However, we have to be cautious about large deals,” Sikka said.
He clarified the company was not laying off employees. “Every employee at Infosys is valuable. There is no involuntary attrition,” he added.
Media reports have said the company had sacked close to 500 employees. Infosys has clarified these employees were asked to leave because of inadequate performance.
Infosys’ first-quarter performance disappointed the Street. For the first time in four quarters, the company missed its revenue guidance. The management attributed this to challenges in consulting services and its core banking product Finacle.
Sikka sounded confident about the company’s digital strategy. MANA, an artificial intelligence platform from Infosys, has seen good traction.
“We have the first four clients on MANA and they are live. We have another dozen or so engagements under way. MANA is renewing our existing business and services and we are expanding to new deals and projects,” Sikka said.
When asked if there have been any issue that have disappointed him, Sikka said after being in the industry for the past two years ,the conversations that he (Infosys) still has with clients are not strategic or of high level. “By-an-large are these industry of procurement, IT oriented kind of conversation that are largely cost and RFP driven. I have accepted this and we are transforming in this segment too, but that is one source of unhappiness for me. I wish that we had the ability to have a much more strategic conversation with client, we have started that but still at a relatively small number of client, approx. 50 out of more than 1,000 clients. This is the case with the entire industry,” he added.
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